O2 debt wrecks mortgage application for homebuyer … again | Mortgages

In February last year, Guardian Money reported how a missed mobile phone payment of just £7.91 jeopardised homebuyer Adam Vaughan’s chances of getting a £220,000 mortgage. Twelve months on, it’s a £57 missed mobile phone payment that has left Conal Duffy in danger of losing the mortgage he needs to buy his dream house.

Both cases involve mobile phone giant O2 slapping black marks on people’s unblemished credit files.

Duffy’s experience provides fresh evidence that seemingly trivial issues relating to mobile phone contracts are still coming back to haunt people who apply for mortgages, loans and credit cards. All too often, they are then being turned down by banks for not meeting their rigid credit-scoring criteria.

Duffy got in touch with us after reading the Money article about Vaughan, who is the Guardian’s environment website editor. Vaughan feared he was going to lose the home loan he was applying for after being told he had an “adverse credit history”, which might mean he couldn’t borrow as much as he wanted. Shocked, he got hold of a copy of his credit file, which showed five missed payments relating to an iPhone contract. Vaughan had changed network and had apparently cancelled his O2 direct debit too early. He told us O2 agreed to remove four of the missed payments from his file, but couldn’t, or wouldn’t, remove the final one for £7.91.

As we reported at the time, there was a happy ending for Vaughan, because O2 did, eventually, take the mark off his file and his mortgage application was approved a short time later. But it’s somewhat disheartening to learn that people are still falling foul of this problem.

Duffy, 37, was in a very similar position – though after Money got involved, the situation brightened for him, too. He and his wife separated about a year ago, and since then he has been looking for a house to buy. But when he finally found the perfect place, he was given the bad news.

“I’ve got a 15% deposit and a secure job, everything is fine, but my broker told me something was coming up on my credit score,” says Duffy, a professional musician and music teacher.

“I got my credit report and there were three missed payment ‘markers’ that O2 applied. They are preventing me getting a mortgage with any company.” The only lenders that will accept him want a deposit of more like 35%.

The markers relate to his wife’s mobile phone, for which he had been paying.

“Her contract had expired – or so I thought. We had both redirected our mail, but O2 had unfortunately mis-spelt my name as Donal Duffy, and therefore a letter reportedly sent by O2 never arrived. No emails arrived, nor did any phone calls.”

He says he paid the outstanding amount in early December, as soon as he became aware of it, but O2 won’t remove the markers.

“I’ve pleaded with them because I now look like losing the house that me and my children are so looking forward to living in. How can an outstanding bill of £57 that’s been paid, stop me getting an £80,000 mortgage?

“I don’t think they should have that kind of power,” says Duffy, who currently lives at his parents’ house in Leigh, Greater Manchester, and has a three-year-old son and six-year-old daughter.

He says his experience shows that nothing has changed since our article a year ago, and adds that this “crazy system” is effectively contributing to the slowdown in the housing market.

In an email sent to Duffy and seen by Money, an O2 customer relations employee said his July and August 2011 bills, totalling £71.48, went unpaid, though the final bill produced in September brought the outstanding balance down to £57.65, which was settled on 7 December.

The employee said he had “changed the name to show it as Conal Duffy,” and that while he was not in a position to remove any late payment markers, he was offering to refund the £57.65 “as a credit to say sorry for my delay”.

This week, things looked a lot brighter. Duffy says O2 has now amended his file to say his account is settled. As a result, his credit score has jumped from 816 to 961 out of 1,000. “Thanks for that – I’ve been asking them to do that for months. I’m more confident about getting a mortgage now,” he told us.

In a statement, O2 said: “We put a block on Mr Duffy’s account following two unpaid bills in July and August 2011, for which we sent a number of reminders via text, email and in writing to his registered address.

“It subsequently transpired Mr Duffy had cancelled his direct debit with his bank in July 2011, but made no attempt to contact us or pay for continued use of his account. In December 2011, Mr Duffy contacted us to clear his balance in full, and we updated his credit file accordingly.”

It added: “As per our terms and conditions, we are obliged to report an accurate reflection of our customers’ payment history to our credit agencies, which we have done in this case. We would urge customers to contact us as soon as possible to notify us of any change of circumstance relevant to their account with us.”