Woman’s mortgage hopes smashed by £16 phone bill | Personal Finance | Finance

A single significant blemish on your credit file could be the barrier between you and the ideal mortgage, or even prevent you from securing one entirely, depending on your credit score.

One would-be homeowner was left in a quandary when a mere £16 default landed her in hot water with lenders. Seeking guidance from Sky’s Money Blog, the UK resident disclosed how iD Mobile had tarnished her credit history over a debt she didn’t even know existed.

Caitlin recounted how she had terminated her direct debit and ceased using the service, yet unbeknownst to her, the SIM card had quietly racked up £16. Unseen emails from iD Mobile had been diverted to her spam, and a letter alerting her to the issue went unnoticed.

Despite settling the debt, Caitlin lamented that the £16 is still “stopping me from getting a mortgage“.

Defaults, insolvencies, and court judgements rank as some of the most detrimental entries on your credit report, which mortgage providers scrutinise intensely prior to engaging in any home loan negotiations. The specifics of the default amount and its backstory are often not apparent to those evaluating credit files, who are vigilant for any indicators that a prospective borrower might default on their repayment.

Sky News obtained an outline of Caitlin’s plight from iD Mobile, which showed that after cancelling her direct debit in August, she was alerted via text about possible missed payments and added fees. For the following four months, some instalments failed to go through, leading to her account being shut down and a default lodged with credit agencies come December.

Caitlin cleared her dues by February, and agencies were updated on the resolved default. Scott Dixon from Complaints Resolver chimed in stating: “Cancelling a direct debit does not terminate the contract. It merely stops the payment. You should always put a cancellation request in writing and adhere to the T&Cs you have signed and agreed to.”

Following Scott’s guidance, Caitlin should have concluded her contract and SIM agreement instead of merely ceasing direct debits and after scrutinising iD Mobile’s chronology, confirmed the company had the right to register the default. He noted that defaults might be expunged if proven erroneous or the firm consents to its erasure.

For Caitlin to purge her credit file, she’d need to contact credit bureaus such as Experian to inscribe a “notice of correction” for lenders to understand the situation better. Scott mentioned: “You need to stress that the debt has been settled and it was an honest mistake which was remedied at the earliest opportunity.”

Scott, a financial expert, advised the saver to request a notice of correction and then obtain a copy of her credit record to ensure the change was implemented. He emphasised that as the default ages, lenders are less likely to consider it significant.

Experian, the credit reporting agency, stated that savers can request an update or removal of a default record by lodging a credit report dispute with them. Upon receiving this request, Experian will liaise with the lender involved in the default to verify the claim’s accuracy and amend your credit record accordingly.

However, the credit firm also pointed out that unless there is an error, a default cannot be removed from your credit report within the first six years. Despite this, it offered some advice on how savers can lessen the impact of a default on their financial goals.

Primarily, it recommended settling the default as quickly as possible, as a “satisfied” status appears more favourable to lenders than an unsettled default. Additionally, savers can request companies like Experian to add a note to their credit report explaining the circumstances behind the default, such as redundancy or long-term illness.

Boosting your overall credit score can “help balance out the negative impact of a default” according to Experian, who concurred with Scott that time will serve as one of the best solutions. They added: “As your default ages, it may become less important to lenders. So, after a few years, you may find it easier to get approved for credit again.”