What do I do if I have had a late payment?
It’s best to get on the phone to your lender or creditor as quickly as possible, especially within a month of the payment being missed.
If you seek to rectify your error immediately, they may not mark it on your credit file. Paying a bill a couple of days – or even weeks – late may see you escaping a hit your credit score.
If you have missed a bill, once you’ve paid it, make sure you phone or email to say it has now been paid.
A payment can take three working days to clear and so, if your creditor has at least been told a payment is coming, it may sway them from marking your file.
A late or missed payment can scupper your chances of getting a mortgage, but there are steps you can take to keep on the path to property ownership. This guide will explain how.
Which? Mortgage Advisers can give you expert advice on your mortgage options.
I haven’t paid a bill. What kind of mark will appear on my credit history?
There are different types of marks that can go on your credit reports if you miss a bill.
- A late payment is recorded if a bill is paid after the due date has passed.
- A missed payment is when you entirely fail to pay a bill.
- You can get a default after several missed payments - anything from three to six – on your account.
You will receive a written notice advising you of the default, you're given 14 days to respond. The creditor can then close your account and demand all payment in full. This default will lie on your credit score for six years.
What is the difference between a late payment and arrears?
A late payment is one which missed the deadline but was satisfied within a month. Arrears are payments which start to add up, beyond that month.
How do late and missed payments affect my credit score?
Late payments stay on your credit history for six years, as do missed payments and defaults, but they appear differently on your credit report.
Lenders assessing them will see a small number next to each late payment to advise them how many months late the payment was – i.e. 1 month, 2, 3, etc.
A late payment might be ignored by lenders and have no or little impact on your credit score if it took place two to three years ago.
But missed or default is considered more serious. A mortgage lender will see the amount owed and the duration it took to pay off. The more recent they are will affect whether mortgage lenders will consider you.
Can I still get a mortgage if I have a late or missed payment?
Your mortgage chances will definitely take a hit - but by how much depends what you missed your payment on, how long it was and how big a deposit you have.
There are two types of borrowing: secured borrowing, a loan that is linked to a secure asset like a mortgage or a car payment, and an unsecured borrowing, such as a phone or utility bill, or credit card.
Missed payments to unsecured loans are seen as less serious than delays with secured loan payments. If you have just one or two late payments to unsecured debts over the past six years, your mortgage application is unlikely to be affected.
A first-time buyer with a small deposit looking to get a 95% mortgage may struggle to borrow at such a high loan-to-value with a series of missed payments.
This is because the lender is already taking a risk by allowing you to borrow such a significant proportion of the property's value, and there's a risk that if house prices drop, you could fall into negative equity and the lender may not be able to recover its loan.
It prefers small-deposit borrowers to have a clean credit record to make up for this risk. Any blemish on your credit could impact negatively on your mortgage chances.
What if I have a missed payment in the past 12 months?
The more recent your lapse, the more harshly your lender might assess you. As described above, your chances look slimmer if you've only got a small deposit to put down.
Which late payments are the worst for getting a mortgage?
Each lender will have its own rules and criteria, but generally, missed or late payments for utilities are the least serious, and missed mortgage payments are the most serious.
- Least serious: mobile phone bills
- Utilities (gas, electricity, water)
- Credit cards and unsecured loans
- Secured loans
- Most serious: mortgages.
What if I have a missed payment on my existing mortgage?
The biggest red flag for mortgage lenders is a missed payment on an existing mortgage.
If you had a single late payment several years ago, this might be overlooked, but it is pivotal you are up to date with your current mortgage. If you are behind, you may not find many agreeable lenders, even in specialist areas.
Can I get late payments removed from my credit report?
It is possible, but entirely on the discretion of the lender or company you hold an account with, or you can prove they shouldn’t be there in the first place.
You can request a ‘Goodwill Adjustment’ if you are a long-standing customer of the lender and have previously had an immaculate credit score.
You can also dispute the late payment as inaccurate if you can prove it wasn’t late or the wrong amount was requested. Some lenders may also remove a single historic late payment remark if you agree to sign up for automatic payments, such as a direct debit.
But you should take immediate steps to try and improve your credit rating, particularly if you have late, missed or defaulted payments. Find out more in our guide to how to improve your credit score.