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How long will a missed payment affect my credit score?

Your credit report lists all the credit agreements you have entered into from the past six years including personal loans, mortgages, credit cards, store cards, mobile phone contracts and car finance agreements.  It includes a history of how you have managed your repayments and will show if any payments have been missed. Each credit agreement will be coded to indicate the account status. Typically a 0 indicates that your payments are up to date while a 3 shows payments are three months late. The letter D indicates the account is dormant and not being used while a U is displayed when a credit agreement is new and the information is not yet available.

When lenders first came together to share data with credit reference agencies, they decided 6 years of credit history would be a sufficiently long enough period for them to be able to assess whether customers can be relied upon to honour any future repayments.

If you fail to make a payment on a credit agreement when it falls due, it will be listed on your credit  report and can be detrimental to your chances of getting further credit for a period of 6 years.

James Jones, from credit reference agency Experian, says "A track record of missed payments, even occasional, may be enough to convince a lender that you are not a good risk," he warns.

Owen Roberts, Head of credit reference agency Callcredit Check says “These marks stay on your file for 6 years after the date of settlement of the accounts. In the case of a mortgage, it’ll be there for the life of the mortgage plus 6 years.”

So if you missed a payment on a mortgage, it could remain on your credit file for a very long time. For instance if you missed a payment in 2013, the first year of a 25 year mortgage, the missed payment will remain on your credit report for the entire remaining period of the mortgage plus 6 more years on top of that - 31 years in total.

Reassuringly, Owen Roberts comments: The important thing to remember is time’s a healer and payments when you miss them, as they age become less and less relevant to prospective lenders. A prospective lender’s always going to be interested in how recently did you miss a payment.”

Laura Wale, a money adviser from National Debtline, comments: “Also important to remember, that a lot of things do affect your credit reference file. So a missed payment will be a factor, but also your age, whether or not you’re a homeowner, whether or not you’re on the electoral roll. How you conduct yourself financially with your other credit will all contribute to your overall credit score. So if you’re up to date with everything else, one individual oversight may not be quite as damaging as it’s been implied.”

The unfavourable impact a missed payment has on credit scoring will reduce over time and assuming you have managed your finances well since, is likely to be counterbalanced by more recent positive repayment information.

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