Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what discussions the Government has had with credit rating agencies on the effect on people's credit ratings of mortgage holidays or missed payments as a result of the effect of the covid-19 outbreak on household incomes.

On 20 March, the Financial Conduct Authority (FCA) published guidance on what it expects mortgage lenders to do for consumers facing financial difficulties as a result of COVID-19.

As part of this guidance, the FCA set out that the consumer’s credit score should remain unaffected by taking out a payment holiday. This has been achieved through the masking of the arrears status on the borrower’s credit file.

Where a borrower who has not taken a payment holiday misses a payment, this will be recorded on their credit file in the usual manner. Information held by credit reference agencies (CRAs) is purely factual, and it is for individual lenders to decide how they use that data as part of their lending decisions.

It is important to note that the scores that individual CRAs provide are proprietary and may have a limited bearing on how lenders assess the data on a customer’s overall credit file. Whilst some lenders use a CRA score, others will use the entirety of information contained on a credit file and compare this with their own individual lending criteria. Lenders may also use information beyond the borrower’s credit file when deciding whether to accept a credit application. This could include asking the borrower questions directly about their finances, as well as assessing income, expenditure and future ability to make repayments, any of which may have been affected by COVID-19.

HM Treasury and the FCA have been working closely with lenders and the CRAs on this matter throughout the crisis and will continue to do so to ensure the best outcome for consumers.