Mortgage fear if you had a loan ‘holiday’

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Borrowers who took loan repayment ‘holidays’ at the height of the coronavirus crisis are struggling to obtain mortgages despite assurances the breaks would not affect their credit score.

Sources told The Mail on Sunday that banks were turning away customers who had taken payment holidays on home loans, credit cards and car finance, months after the Government and credit agencies said there would be no impact.

The sources said applicants could often get a provisional loan agreement from a bank, but were then rejected by the bank’s credit checkers over fears they were not reliable borrowers.

Suffering: Many customers are struggling as they try to take out a mortgage or remortgage with a new lender

Suffering: Many customers are struggling as they try to take out a mortgage or remortgage with a new lender

Business Secretary Alok Sharma said in March that banks had negotiated the rules around payment breaks with the financial watchdog, and that they would not affect a customer’s credit score.

He said at the time: ‘The FCA (Financial Conduct Authority) has talked to banks and lenders about this issue, particularly those who may need to delay payments on credit card bills. And I think the advice that’s gone out is any changes need to be properly documented and it shouldn’t affect your credit score.’

Credit agency Experian also reassured customers they would not be hit by taking advantage of the blanket payment freeze.

Jonathan Westley, chief data officer at Experian, said in a statement in March: ‘Many lenders are offering payment holidays or other arrangements to help people who have been affected by the outbreak.’

He said Experian – and also credit agencies TransUnion and Equifax – ‘will then make sure that the agreement is reflected in your credit reports so that your score is not changed by any payment holiday you agree’.

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But now many customers are struggling months later as they try to take out a mortgage or remortgage with a new lender.

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