Credit scores to be protected during Covid-19 pandemic

Apr 25, 2020 | 0 comments

The agencies confirmed that an emergency payment freeze will not be recorded anywhere on a credit report.

Three credit reference agencies – Experian, Equifax and TransUnion – have confirmed that consumer credit scores will be protected if people take payment holidays as a result of the Covid-19 pandemic.

Earlier this month the government announced that residential or buy-to-let borrowers impacted by the crisis can ask their mortgage lender for a payment holiday of up to three months.

To help people applying for payment holidays, the credit reference agencies are implementing an ’emergency payment freeze’ which will ensure that an individual’s current credit score is protected for the duration of an agreed payment holiday.

Other special arrangements, including reduced payments, paused payments or increased credit limits, are also covered by the emergency payment freeze agreement.

The agencies confirmed that an emergency payment freeze will not be recorded anywhere on a credit report and will not increase the level of any existing arrears.

Jonathan Westley, chief data officer at Experian, said: “These are challenging times. While everyone is rightly focused on staying safe and healthy, we know that many people are also concerned about the impact on their income. If you’re worried about meeting regular payments because of the pandemic, it is crucial that you speak to your lenders and other providers as soon as possible so they can help.

“Many lenders are offering payment holidays or other arrangements to help people who have been affected by the outbreak. Through this new industry agreement, Experian, TransUnion and Equifax are helping protect people’s credit scores during these difficult and unprecedented times.”

Payment holidays

The Chancellor announced on 17th March that mortgage lenders have agreed to provide a three-month payment holiday to affected customers who get in touch. This means that if you can’t pay your mortgage as a result of Coronavirus, you can speak to your lender about taking a temporary break in your mortgage payments.

If you decide to take a payment holiday, after three months, your lender will review your circumstances and agree with you how to make up the deferred payments. Interest will still be charged for the duration of your payment holiday so this could mean an increase in your future monthly mortgage payments, or an extension to your mortgage term.

On 9th April, the Financial Conduct Authority (FCA) confirmed that they are expecting banks and lenders to offer even more financial assistance to customers at this time. This includes a temporary payment holiday for loans and credit cards (as well as mortgages) for up to three months.

As of 17th April, the FCA said they expect lenders to offer three-month payment holidays for car finance agreements and a one-month payment freeze for high-cost short-term credit – which includes payday loans.

We’ve been working with the Government and the financial services industry to help protect your finances at this difficult time. As a result, agreeing with lenders to pause your payments for a while should not result in missed payments building up on your credit report – which should generally mean your credit score won’t be damaged.

Please bear in mind that your credit score is made up of many other factors, such as your total level of unsecured debt and how heavily you’re using your credit cards (your credit utilisation).