‘I’m a mortgage expert and this mistake can wreck your credit’ | Personal Finance | Finance

Borrowers have been urged to avoid a common mistake that can “wreck” their credit profiles and affect their ability to get mortgages and other credit facilities in the future. A mortgage expert has warned that more people are likely to commit the error as households try to generate as much interest as possible on their cash given skyrocketing prices at the pumps due to the war in the Middle East.

Emma Jones, managing director at Runcorn-based Whenthebanksaysno.co.uk, said: “A lot of people with mortgages, quite understandably, want their money to work for them as hard as possible. That’s even more the case at present, with the cost of fuel already hitting people’s wallets as a result of the soaring oil price.

“One way they try to generate extra income is through switching funds from their main bank account, from which their mortgage payments and other commitments go out, into higher interest-paying accounts.”

But Emma said that, while the idea was great in theory, in practice it can create real financial issues if it is not monitored properly.

Emma continued: “The problem with this is that people too often forget they are, well, human and not machines and sometimes forget to transfer the funds back to cover major direct debits such as their mortgage payment or other credit commitments.”

Emma said the fallout could sometimes be extreme and financially damaging: “Missing payments can be credit-wrecking and mean you can’t get access to the best rates or lenders, which can cost you considerably more in the long term than the savings you were trying to generate in the short term.

“My advice is take the hit and accept that your main bank account has a role that is about managing your money rather than trying to extract the most returns from it. Ensuring you meet your monthly outgoings and commitments is essential to your overall financial health.

“Moving money around in accounts at specific times each month does not take into account the fact that sometimes life gets in the way and you forget, even if you have a calendar reminder on your smartphone.

“You’re eating out when the notification comes in and say to yourself, I’ll do that later, and then you forget.

“The feeling of missing a payment can make your heart sink but it can sink your credit score, too.”