The Consumer Finance Association (CFA) has questioned whether forbearance during the coronavirus pandemic should be shown on credit files.
Financial Conduct Authority (FCA) guidance during the pandemic said lenders should not report a worsening status to credit files if borrowers take a payment freeze.
The FCA also said that lenders can use other sources when making a decision.
But Helen McCarthy, head of policy at the trade body for short-term lending, said omitting payment holidays from credit files, known as “masking,” undermines the reliability of credit reports.
“Many customers experience financial difficulty as a result of circumstances outside their control but do not benefit from that information being masked,” she said.
“The approach being taken currently raises a broad question of fairness – someone made redundant in January is treated differently to someone made redundant in April or May. It is hard to see the justification for this.
“Surely the real question is how we create a credit market that is sophisticated enough to understand that some people are impacted temporarily and that others will be facing long-term financial difficulty.”
She said credit records are essential and masking or removing historical information, reduces its value to help assess whether a loan is affordable.
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