Article by Richard Catlin - 2nd January 2020

Paying Late Could Cost You More Than A £12 Charge

So called ‘stealth charges’ are relics from before the 2008 financial crisis and didn’t just catch consumers unaware with surprise payments but also represented a total lack of transparency between customers and their banks. The Office of Fair Trading ruled that the fees were unlawful, after having brought a test case against the biggest banks at the time: Abbey National, Barclays, Clydesdale, Halifax, Bank of Scotland, HSBC, Lloyds, Nationwide, NatWest, and Royal Bank of Scotland.

The result was a drastic reduction in these hidden fees to a maximum of £12 each time.

While ‘stealth fees’ were a regular hot topic for financial campaigners for a number of years, today’s banking practices are comparatively much more transparent and less headline grabbing. Any fees are required to be explicitly stated from the outset and throughout and any uncertainty can be easily solved by contacting the bank.

Although these types of charges are rarer nowadays, having awareness of your due payments still remains as crucial. A missed payment may result in a negative marker being added to your Credit Report, which in turn could affect your Credit Score and any future applications. Providing you’re aware of all your scheduled outgoings and have them running like clockwork, this shouldn’t be something to fret about, but understanding how late payment markers are added and what they mean for you as a consumer is as important now as ten years ago.

How does a late payment affect me?

Late payments are perhaps the most common negative entries that people find on their Credit Reports. Put simply, a late payment will be added to your Credit Report when a scheduled, monthly payment isn’t made on time, and the creditor marks it as such on your Credit Report. This negative entry will then be visible to any other organisations checking your Credit Report and could lower your overall creditworthiness and could make things (such as being accepted for further finance) trickier.

In particular, a single late payment to a mobile phone provider can be devastating, as many mobile phone suppliers will often refuse to supply a new contract phone to applicants with a single late payment. This is one of the most voiced complaints heard at checkmyfile from customers who are unexpectedly declined and otherwise very creditworthy.

People applying for credit with a few late payments recorded against them are often surprised to learn that the interest rate offered when they are accepted is well above the advertised ‘Typical APR’ - which by law only applies to two thirds of applicants. That’s because of something known as ‘rating for risk’ – basically if you are deemed to be more likely to pay your bills late, the interest rate you’ll be offered will be adjusted to reflect that increased risk of default.

What can I do about a late payment?

Once a late payment has been added to your Credit Report, it will remain for six years from date of account closure.

If the balance remains unpaid, the chances are that the single late payment will turn into arrears (consecutive missed payments), with each additional entry being more severe than the last.

The next stage would be for the arrears to become a default, which will harm your Credit Score even more severely.

From there, the creditor will likely escalate its attempts to reclaim the funds, perhaps even selling the debt to a debt collection agency or issuing a County Court Judgment (CCJ). A CCJ remains for six years from date of issue, regardless of whether it’s paid or not.

If you’re able to pay the outstanding balance while it’s just a single late payment, you may want to settle the debt to prevent it from getting worse each month.

Organisations that share information with the Credit Reference Agencies rarely remove correct negative entries before their six-year period has fully elapsed. That said, there’s no harm in calling to request a single late payment is removed, providing you’re a longstanding customer, timely enough, and it’s never happened before. While goodwill gestures are rare, if a lender agrees to take a late payment off early, it will mean that your Credit Rating doesn’t take an immediate hit.

How do I check my Credit Report?

When you apply for a credit card, mortgage, or new mobile phone (to name just a few examples) the organisation you apply with will perform a credit check on you to see whether you’re the type of customer they’re looking for. What this means is that they will access your Credit Report from one of the Credit Reference Agencies and then assess it against their own acceptance criteria before giving you the thumbs up or thumbs down.

While you can never be certain of an individual lender’s criteria, there’s also no guarantee which Credit Reference Agency will be used to perform the credit check. The only way to know what a potential lender will see is to check them all yourself. Our service aims to help people understand what all Credit Reference Agencies are reporting about them, so you can see everything in one place.

Our Multi Agency Credit Reports are the most detailed in the UK, including your full Credit Reports from Experian, Equifax, and TransUnion – as well as the Public Information from Crediva – so you can be certain you’re seeing everything.

If you haven’t already, you can check your Multi Agency Credit Report free for 30 days, then just £14.99 monthly, which you can cancel at any time online, by freephone or email.

Updated on 02/01/2020 by Sam Griffin

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