Which bills should we prioritise?

The current economic climate has been responsible for increasing the pressure on many people’s finances, causing some to miss regular payments such as credit card bills or mortgage costs. Unfortunately these missed payments can impact your credit rating for a long time.

Banks use a range of information to make their decision about whether to lend money, including data held by credit reference agencies. So itís worth monitoring your credit healthiness, as sometimes it can be quite easy to improve it.

It isnít just banks and credit card companies ñ utilities like gas and electricity companies also now either already share details of your repayments (though this can be positive if you are building a good credit history), include any missed payments or defaults, or reserve the right to in future. If yours does this, it’s important to be aware of the knock-on effect of your ability to get credit if you miss payments.

Get your priorities right

If you are struggling to meet all your commitments, you should contact your lenders straight away. Itís best to make sure you prioritise your debts so you can sort out the most pressing ones first. These neednít be the biggest debts -these are more likely to be the ones where you may face serious action taken against you should you not pay what you owe. [1]

These could include:

Not keeping up with mortgage payments ñ the lender could take possession of your home

Not keeping up with rental payments ñ your landlord could get a county court order to evict you

Not paying taxation ñ failure to pay tax, national insurance or VAT could lead to bankruptcy, or in the case of serious fraud, a prison term

Failure to pay utility bills ñ gas, electricity or phone companies could disconnect you and take legal action to recover the costs. Water rates arrears could result in court action, but at least you are protected from being disconnected.

Failure to keep up with Hire Purchase payments ñ you could have your car, computer etc recovered

In addition, failure to pay Business Rates, magistratesí court fines and maintenance/child support could all result in visits from the bailiffs and your goods being sold to pay for what you owe.

Credit debts are here again

It is of course also extremely important that you keep up with other credit payments too. Failure to keep up with payments could lead to county court judgments, often with extra costs on top ñ which would be likely to harm your chances of getting further credit.

According to Experian, responsible lenders want to know that you can comfortably afford to manage any new borrowing, so they calculate a credit score that helps them to assess the chances that you will be able to repay what you owe. To do this, they take information from two main sources ó your credit report and your credit application form. If youíre an existing or past customer, they will also use their experience of how youíve managed repayments in the past.
Credit reference agencies compile details of all your credit agreements and how you manage them, including credit/store cards, loans, mortgages, bank accounts, energy and mobile phone contracts.

Just one late payment to a credit card company could make an impact on your credit rating, and consequently multiple late payments are very likely to harm your credit score.

Regardless of the reason for a missed mortgage payment, the knock-on effects can be severe. Apart from the costs adding up quickly, the impact on your credit report can be critical if you plan to remortgage with another lender. Banks and building societies are looking at credit histories more closely now than ever. Your Experian Credit Score is a single number between 0 and 999 and is a guide to help you understand how your Experian Credit Report is likely to affect a lending decision.  You can check this online with a 30-day FREE* trial with Experianís CreditExpert
Are some missed payments worse than others?

It can depend on the lender and their own past record with customers. If past customers of a particular lender who had specifically missed several card payments at the point of application subsequently went on to default, then you might find that lender knocking more points off its scoring for missed card payments than other products.

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