Thursday 20 September 2012

The payment date you chose for mortgages and loans is important

Will my Mortgage payment date affect my credit rating?

I have experienced more and more of my clients being affected by having a payment date at the end of the month rather than near the start of the month, for their mortgage and loans. This is because of the credit rating system we use in the UK.

Credit Bureaus such as Experian, Equifax and Credit Call to name a few, take vast amounts of data from our Banks, Building societies and credit providers and add them to our personal credit files.

This allows institutions to search your credit worthiness to see if they wish to lend you money or offer you services. This systemic approach to finance is now the norm.

In regards to this approach, you would expect your bank or building society produce data returns for the credit bureaus in the same manor, following prescribed rules to ensure a fair system for all. Well this is not quite what is happening. In the UK we currently have the information commissioner and the FSA that could prescribe a set process in regards to credit reporting.

However when I delved into it further the Banks & Building Societies follow a voluntary code and not one would/could provide me with the details of the code.

So where does your payment date come into this?

Most Banks/Building Societies report your data at the end of the month. If your payment is due on the last day of the month but you miss a payment by one day this will show as a missed/late payment and therefore is a negative for your credit file and future scoring when credit referenced or credit scored.

Now if your payment day was the first of the month you could pay 27 days later on the 28th and this would not show as a missed payment. A bit unfair and inaccurate right!

Matthew Duncan
Independent Financial Adviser,
Bsc, CeMap, DipFA, CeFA, MIFS, CeLTCI

First Floor Office,
1 Kelston Road
BS22 7FD
Tel 01934 310653 Tel:- 01173 310653
Registered office Tel:- 01823 353970
Fax 01823 339726 Mob 07793130342

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