| Put quite simply, your credit score is a system that is | | | | written off instead of paying the loan in full, then this will |
| supposed to reflect to future potential lenders just how | | | | affect your credit score and in quite a strong way. |
| good, or bad, a credit risk you will be for them. If you | | | | Even these so called ways of getting out of debt by |
| are a good credit risk then they are more likely to get | | | | legal loop holes, that might sound a great idea at the |
| their money paid back on time, but a poor credit risk | | | | time, ultimately mean a whole pile of missed payments |
| increases the chance of late payments, defaults and | | | | and the lender writing off the debt. They are not just |
| even repossessions. | | | | going to walk away from this, they are going to record |
| This means that a poor credit score can mean that | | | | the missed payments on your credit score so that |
| you might not be offered a mortgage or loan when | | | | future lenders may not be willing to deal with you at all. |
| you next apply, or that if you are offered the cash, | | | | So it is all in balance. A late mortgage payment could |
| then the reward might be a higher APR, which will cost | | | | affect your credit score, but it depends on how late |
| you a fortune over the years. | | | | your payment is and how often you make late |
| So just how will missing a payment affect the score? | | | | payments. If you know that you are not going to be |
| Well, this is what the lenders are trying to work out | | | | able to make a future payment it would be worth |
| from the score - whether you are liable to miss | | | | speaking to your lender so that they are aware of |
| payments or make them all on time. This is what the | | | | your situation and could even offer you a mortgage |
| credit score is trying to indicate to lenders and, | | | | payment holiday. This is a way of missing a payment |
| therefore, missed payments will be reflected. | | | | with their permission. And because it is with their |
| But, there are degrees of missed payments. If you just | | | | agreement, it is not going to affect your score at all. |
| forget a single payment, but it is made a day or so | | | | Your credit scoring is all about how you manage those |
| late, then it could even be that the lender does not | | | | debts. Odd slightly delayed payments should only have |
| notice the delay and does not even record it on your | | | | a minimal affect on your credit score, but the effect |
| publicly available credit rating. | | | | rises as your frequency and lateness of repayments |
| However, at the other extreme if you are defaulting | | | | increases. The aim being that if you miss a lot of |
| frequently or even worse you have some of the loan | | | | payments, other lenders know not to lend to you. |