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Financial victims of coronavirus will see credit scores suffer for over half a decade, experts warn

Hundreds of thousands of Brits could find themselves with poor credit scores when the payment holidays come to an end this month. Credit: Getty.
Hundreds of thousands of Brits could find themselves with poor credit scores when the payment holidays come to an end this month. Credit: Getty.

Financial victims of the pandemic could see their credit scores suffer for six years, warns independent credit broker TotallyMoney.

A blanket end to protections on 31 October will see more than a quarter of a million people move from payment holidays to repayment plans.

Lenders will be contacting 323,700 borrowers next month as protections cease on mortgages, credit cards and loans.

Although lenders must make assessments on a case-by-case basis, in most instances they will likely take monies owed from payment holidays, add this to the outstanding balance, and recalculate monthly payments accordingly.

READ MORE: UK savers set to miss out on millions in returns despite epic £75.5bn savings haul in lockdown

Customers unable to meet their full repayments will likely see missed payments and defaults on their credit report, said TotallyMoney CEO Alastair Douglas.

“With so many trying to make ends meet while protecting their health, the last thing anyone needs right now is more worry about how their finances could be affected further by these drastic changes,” added Douglas.

Late payments and defaults remain on credit files for six years, making it harder to get accepted for mortgages, credit cards, mobile phone contracts and to pay utilities by direct debit. It could also drive up the cost of car insurance.

WATCH: What is the Job Support Scheme and how has it changed?

The end of payment holidays also coincides with the stoppage of the government’s furlough scheme, which is to be replaced by the Job Support Scheme.

Despite the government Job Support Scheme, incomes remain considerably reduced, unemployment is at a three-year high, and over half of people fear losing their job over the next 12 months according to a new IPSOS survey.

And some 12 million people are thought to have low financial resilience, reports the Financial Conduct Authority.

READ MORE: One in five young people jobless as UK unemployment 'already at 2.5 million'

TotallyMoney is calling on government to reassess the current protections so consumers are not left out in the cold.

“A lot has changed over the past three months, so a reassessment to see what more can be done to protect the public would be ideal,” said Douglas.

He also advised customers with missed payments or defaults on their credit report to contact each credit bureau and add a notice of correction to their file.

"While this won’t remove the missed payments or defaults, it does give you a chance to explain any mitigating circumstances that may have led to them, such as coronavirus. Lenders must then take this into account when you apply for credit, which could help you get accepted in future," Douglas explained.