Clearing Up Credit Score Confusion

Your Credit Score is a 3-digit number that describes how likely you are to be accepted for credit from Banks or other finance companies.  Each individuals Credit Score is based on their unique credit report, which is a record of how they have managed credit in the past.  If you are looking to borrow money then you need to be aware of your score so you can get the best interest rate. 

In the UK, there is no standard Credit Score.  Each of the 3 credit reference agencies, Experian, Equifax and Callcredit – all use different ways to calculate credit scores.   Experian is the largest credit reference agency. It’s commonly used by lenders, so it’s likely to be very comprehensive.  You can sign up for free to check your scores with each agency to ensure the details they hold on you are correct.  

What should I check on my credit score

1. Check addresses on old accounts.

2. Fight unfair defaults on your file.

3. If you no longer have joint accounts with someone, ensure you financially de-link (ie, separate).

4. Always check your credit reports after rejection. Read why here.

5. Cancel unused credit and store cards. Find out why unused cards can count against you

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The importance of a good credit score

There are several reasons to have a good credit score.  For example, if you hope to take out a mortgage or take a bank loan in order to finance home improvements or the holiday of a lifetime.

Your Credit Score will need to be in good shape in order to get the best interest rates from your finance provider.  The higher your credit score the better.  A high score means that you are more likely to be given credit and achieve better deals when borrowing money or taking out a mortgage.

Ways to achieve a good Credit Score

  • Don’t apply for credit too often

    If you apply for an excessive number of credit products regularly, it is likely to have a detrimental effect on your credit score.  So be sensible, decide which product you want before you apply to lots of different companies. Sometimes it could be beneficial to use a loan matching service.  These services help match or connect you with ne or more lenders.  One such company is iloans.  They are regulated by the FCA and never charge the lender a fee.

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  • Be stable

Finance companies don’t like borrowers who are not stable.  They like lenders who have lived at the same address for a while so bear this in mind if you are thinking of moving on a regular basis. 

  • Don’t pay your lender late

If it’s your credit card repayments, your phone bill or your mortgage, it isn’t good to pay your lender late. Make sure you pay on time, why not set up a direct debit so your payment always gets there on time?

  • Build trust with lenders

Your relationship with lenders isn’t different from other relationships, you need to build up trust.  You can do this by consistently paying your bills on time.  



Your car costs over £200k to run in your lifetime

In a recent survey of 2,000 British vehicle owners; it was found that the average purchase and running costs of a car are just over £205,000 over a lifetime!

These costs are made up of adding together the cost of purchasing cars, having the car repaired, filling it with fuel and making sure that it is legal to drive by paying tax and insurance.

It must also be remembered that the vehicle purchase costs above, don’t factor in the costs that are recouped from reselling vehicles.

The largest costs are fuel!  It’s estimated that the cost of fuel over the lifetime being just over £54,300.  It must be noted that this figure is open to variable fuel prices which can fluctuate in line with oil costs.

The cost of buying a car is the second highest financial cost.  With the purchase costs of being calculated at just under £42,000; with survey participants paying on average just under £8,400 on each vehicle; with it being calculated that each car is owned for five years.

The next highest costs are vehicle repairs which are estimated at just under £42,000.  Insurance costs are also a significant cost at just under £28,000.

These estimates are based on the survey respondents passing their test at 17, driving their vehicle for 63 years and giving up their license at 80 years of age.

Many pensioners don’t claim all their pension benefits!

  • The average sum unclaimed is £1,058
  • The 3 key benefits that are regularly overlooked are Guarantee Pension Credit, Savings Pension Credit and Council Tax Reduction.

Pension Credit is an income-related benefit made up of 2 parts – Guarantee Credit and Savings Credit.

Guarantee Credit tops up your weekly income if it’s below £163 (for single people) or £248.80 (for couples).

Savings Credit is an extra payment for people who saved some money towards their retirement, for example a pension.

Pension credit is an income-related benefit. It’s an extra payment that guarantees most people over 62 a minimum income, yet many don’t realise they’re entitled to it.





Develop your own no spend challenge

With your personal no spend challenge …..It is extremely important to remember that you define what you want your no spend challenge to include (or not include).

For one person, it could mean cutting out their morning coffee. For another, it could mean cancelling all their unnecessary subscriptions or not buying an outfit for every new occasion.

Whatever you choose, it’s important to stay true to yourself and get what you want from it.

It doesn’t always mean cancelling all your bills or cutting yourself off from the rest of the world!

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Set your financial goals for the year ahead

Here are some simple financial objectives, which will help boost your savings.

1. Get the taxman off your back

Nearly seven out of 10 Britons do nothing at all to reduce the amount of tax they pay and as a result they pay £4.6 billion in tax unnecessarily. There are plenty of things that you can do, such as making full use of your family’s tax-free ISA allowances, and seeking capital gains tax and inheritance tax advice, that will leave you more of your money to spend on the things you enjoy.

2. Work out what you need to retire in comfort

Just because you’ve got a good income now, doesn’t mean you will be well off in retirement.  A single man with a £100,000 pension pot would be able to buy an annual income of just £5,500 a year. That’s not a lot of luxury.  If he had £200,000, he would generate income twice that amount, or £11,000 a year. To get the equivalent of the national average salary in retirement, which is currently £26,500, you would need a pension pot of around £500,000.

3. Claim pension tax relief

Pension tax relief is hugely valuable, especially for higher earners. They can get tax relief of up to 45 per cent on their pension contributions, but there is no guarantee this will continue. There is a growing political campaign to cut pensions tax relief for higher earners. Your contributions are subject to an annual allowance of £50,000, falling to £40,000 in 2014/15. Use it if you can. You may also be able to carry forward any unused allowance from the past three years.

4. Review your risk profile

Look at where your money is invested. Does it match your risk profile as you get closer to retirement? The closer you get to retirement, the fewer chances you should take with your money. You might want to reduce your exposure to, say, high-risk emerging markets, and shares and switch your gains into cash or bonds.  Consider taking specialist financial advice.

5. Review your mortgage

The average mortgage rate recently hit an all-time low of 3.47 per cent (January 2019) . If you’ve got equity in your property, you can find deals for as little as 2 per cent or 3 per cent. If you’re paying more than that, it’s time to shop around for a better deal.

6. Think of your kids

If you invested just £84 a month for 18 years, you could build a lump sum of £25,000 for your children’s future. Even £50 a month over the same period could build a fund worth nearly £15,000, which would make a decent contribution to a house deposit. And you can invest a lot more than that, without having to pay tax on the growth or income.