This is controversial advice. It’s worth seeing a lawyer before you take it. If the lender applies to repossess in court, the decision will go on to your credit reference files. But if you hand in the keys the lender may or may not add an entry to the separate database of repossesses. Only other mortgage lenders get to see that database anyway; credit card lenders, etc don’t. So keep your repossession out of court.
Bear in mind as you read this that the way your credit reference files are managed is more complex than it seems. It is well worth doing the credit reference check just to read the information the credit reference agencies send out with your record.
More importantly, a lender who goes to court will ask for a “money judgment”. See the “Legal Rights?” section to see the implications of this.