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Mortgage holiday is labelled as arrears

Lenders&#39 IT systems can recognise mortgage payment holidays as mortgage arrears,leaving customers with poor credit ratings, warns a Wolverhampton IFA.

Kingstons IFA Andrew Clothier says the issue came to light when Woolwich refused his client a mortgage despite the client having never missed a payment with her mortgage with Halifax.

Woolwich refused her application because in the previous 12 months only 11 payments had been made on her mortgage. The client had taken a mortgage payment holiday, as she was entitled to do under the flexible features of her Halifax mortgage.

Halifax was unable to give a reason why taking a payment holiday led to the client&#39s credit rating being hit.

Credit reference agency Equifax suggests that borrowers should contact the credit-rating agencies and ask for a “notice of correction”. This is placed against the missed payment entry on the credit file free of charge.

Clothier says: “This is all very well as long as your credit file is analysed by a human rather than a machine. If your mortgage application is assessed by a computer, it may not react to the notice.”

Scottish Widows&#39 cover and protection marketing director Nick Kirwan is determined to restore the public&#39s confidence and trust in financial services

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