Credit Score Archives

How To Efficiently Use Your Credit Card

Written by Alex Swindells on September 30, 2022. Posted in Credit Score.

A credit card can help you effectively manage your finances, improve your lifestyle, and expand your financial options. For example, a credit card can help increase your credit rating which is reviewed by most lenders.

But how can you efficiently and effectively use your credit card and avoid getting yourself into overwhelming credit card debt? First, let’s explain what a credit card is.

Credit cards are a great way to make large purchases that you otherwise would not have been able to do. As you may already know, with a credit card you will have a credit limit (an amount that is available for you to spend), which, if you start to use your credit, you will be required to make monthly repayments as well as pay any interest gained. Some credit cards may have a 0% interest rate for a limited time; however, ensure that you know and understand your interest rate before you start using your credit card.

How To Use A Credit Card

As previously mentioned, if used sensibly, a credit card can help to improve your finances and, overall, your lifestyle. However, it can be easy to use your credit card in the wrong way, getting into debt that is unmanageable.

So, below are a few tips to help you use your credit card sensibly and to stay on top of your debt.

1) Spread The Cost

A credit card is good to have when an unplanned event occurs, resulting in an extra expense. The credit you have available can be seen as your credit for emergencies.

For example, if your car suddenly breaks down, but you don’t have the money to fix it, then this is when having a credit card is handy. You can pay to have your car fixed without affecting the money you need to live. Additionally, you will be able to spread the cost out.

Being able to make a big purchase and spreading the cost over several months is particularly useful if your credit card has a 0% interest rate (the terms and conditions of your credit card, including interest rate details, should be provided when you apply for your credit card).

Additionally, it can work out cheaper to use your credit card for big leisure purchases, such as buying a new TV. Rather than paying for the TV in monthly instalments, which usually comes with a high-interest rate, you can pay for it in full by using your credit card.

2) Pay The Balance

Only use your credit card when you know you will be able to pay off the balance. If you are considering using your credit card to pay for a large purchase, consider whether you will be able to afford to repay it through monthly instalments.

If you do not think you will be able to repay what you have borrowed over a reasonable amount of time and without it putting you further into unmanageable debt, then you should not use your credit card to make the purchase.
Remember, a credit card is good to have in an emergency or to ease your financial situation. When you start making unnecessary purchases that you cannot afford, then that is when having a credit card can lead to unmanageable debt and cause your credit rating to fall.

3) Limit Credit Card Usage During A Mortgage Application

When applying for a mortgage, it is advisable not to overuse your credit card, particularly during the months leading up to you searching for and comparing the best interest rates that you may be offered.

This is because you need to demonstrate to lenders that you have control over your finances; that you can manage your earnings and expenditures sensibly and without the use of continually using credit. The higher your debt, the harder it will be to secure a mortgage offer from a lender.

When considering whether you can actually afford a mortgage, lenders will look at your credit report, which will include details of your credit card limit and how much you have used. The more credit that you have available, the better it will look to lenders because they will see that you are not having to rely on this credit to keep on top of your bills.

Your credit report will also detail any late payments you have made, which we look further into in the next tip.

4) Avoid Late Payments

If you fail to pay your credit card bill on time, then not only could this show up on your credit report and lower your credit rating, but you could also be charged a late fee, putting you further into debt.

Additionally, you may be asked by the credit card company to pay back the amount you owe in full, or they could even try to take you to court. As a result, your credit report will be negatively affected, making it more difficult to gain other types of credit.

If you know that you may struggle to pay your credit card bill on time in the future, then it could be worth getting in touch with your credit card company because they may be able to reduce your payments or pause them temporarily.

5) Avoid The Minimum Payment

When using your credit card, try to make more than your minimum payment each month. If you only pay the minimum amount each month, then it could take years for you to repay what you owe, particularly if your credit card has a high-interest rate.

Ideally, try to pay off a large chunk each month via direct debit or, if you can, pay the full amount of what you owe each month, increasing the available credit that you have, which will also look good on your credit report.

6) Do Not Make Cash Withdrawals

Do not use your credit card to make cash withdrawals because your credit card company will charge an extra fee, which will increase the amount that you owe that month. Then, if you are unable to repay what you owe, again, it will impact your credit score.

If you do need to withdraw cash, consider applying for a money transfer card, but be aware that there will still be an extra fee involved.

We hope that these tips will help you to efficiently use your credit card, easing your financial situation instead of putting a strain on it.

However, if you are struggling with credit card debt and are unable to repay what you owe, then an alternative debt solution may be worth considering, such as an Individual Voluntary Arrangement (IVA).
With this debt solution there will be IVA Protection, so to find out more, get in touch with Swift Debt Help.

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

How To Improve Your Credit Score Before A Remortgage

Written by Alex Swindells on September 15, 2022. Posted in Credit Score, Mortgage.

If you are considering remortgaging your property, you should aim to improve your credit score. The higher your credit score, the more likely you will be approved for a remortgage in addition to being offered better rates.

So, what is a credit score and how are they calculated?

A credit score is based on the information in your credit report. This information is provided primarily by creditors and lenders, but other sources are used, such as the Electoral Roll and the council, to gather further details on your financial history.

Your credit score can vary depending on which credit reference agency you use. Each agency has its own maximum credit score and they will analyse metrics differently to calculate the credit score they decide to give you.

For example, you can achieve a maximum credit score of 999 with Experian whereas, with TransUnion, the maximum credit score you can get is 710.

According to Experian, the average credit score in the UK is 759, which is rated as a fair credit score.

This blog will provide you with some tips to help you improve your credit score. But first, what is meant by remortgaging and can you do it to pay off debt?

Can You Remortgage To Pay Off Debt?

Remortgaging is the term used when you pay off your original mortgage with the proceeds of your new mortgage. You may choose to do this to release equity from your property to pay off any debt you have.

The equity released will be tax-free and, with the new mortgage, your new monthly payments could be reduced; however, this isn’t the best solution for everyone.

If you are unable to remortgage, a debt solution, such as an IVA (Individual Voluntary Arrangement) might be a more viable option for you, depending on your circumstances.

An IVA is a legally binding agreement that can be arranged to help you affordably repay your creditors. A payment plan is put in place, according to your income and expenditure, to ensure that you have enough money each month to pay for necessities, such as your rent/mortgage, bills, and food.

Why Has My Credit Score Gone Down?

Many factors play a part in the rise and fall of your credit score.

Below are just a few reasons why your credit score might have dropped:

If you have missed a payment.

If there is a derogatory mark on your credit report.

If there is a change in the credit utilisation rate.

If your credit limit has been reduced.

If you have closed a mature account.

If you have recently applied for, or opened, new lines of credit.

If there is a mistake on your credit report.

5 Ways To Improve Your Credit Score

1) Pay Your Bills On Time

As previously mentioned, if you miss a payment, then this can negatively affect your credit score. So, to ensure your monthly payments are made on time, consider paying your bills by direct debit.

2) Avoid Hard Searches

Whenever you apply for new credit, (for example, when you take out a new phone contract,) the company will carry out a hard search, which will then be recorded on your credit report.

It is possible to ask some companies to carry out a soft search, which is better for your credit score.

But what’s the difference between a hard search and a soft search?

Well, whilst both a hard search and a soft search will appear on your credit report, lenders will only be able to view the hard searches; the soft searches will be invisible to them, so it will not affect their decision as to whether they lend to you.

3) Settle Any Debts

If you owe multiple creditors money, then this can negatively affect your credit score.

Consider setting up direct debits to ensure you are making regular payments to these creditors.

Additionally, try not to use all of your available credit; keep it below 30% if possible.

4) Regularly Check Your Credit Report

Your credit score could be negatively impacted because of false information on your credit report. To be able to correct any discrepancies when they occur, you should check your credit report often.

Your information should be up to date, including personal details, and all of your accounts and credit cards should be listed.

Any irrelevant, out-of-date information should be reported to the credit agency as soon as it has been identified.

5) Register To Vote

Registering to vote is possibly the quickest action you can take to help increase your credit score.

You can register online, providing your current address, and by doing so, you could add up to 50 points to your credit score.

We hope this blog has provided you with the information you need regarding remortgaging and how to improve your credit score; however, read more on Swift Debt Help to discover more about remortgaging your property.

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

What Are The Differences Between Good And Bad Debt?

Written by Alex Swindells on August 25, 2022. Posted in Credit Score, Debt help.

Not all debt is considered bad debt. There is such a thing as good debt, which can benefit your financial position.

For example, good debt can help to improve your credit score, making it easier to apply for credit and to be approved for loans at better interest rates. In the long run, this will have positive effects on your life.

Bad debt, however, will financially drain you, lower your credit score and make it harder for you to better your financial position or apply for loans, such as a mortgage.

If you are struggling with bad debt, then you may want to consider applying for an IVA (Individual Voluntary Arrangement). An IVA is a legally binding agreement that can be arranged by an Insolvency Practitioner to help you affordably repay your creditors.

In the meantime, to help you understand the differences between good and bad debt, we’ve created a list of the types of debt that fall under each, along with ways to help you go about ensuring you obtain good debt.

What is Good Debt?

Businessman pushing credit score dial towards a good score

Good debt should allow you to improve your credit score. This will help to demonstrate to lenders that you can effectively manage your finances, which will open further credit options for you.

To obtain good debt, careful planning needs to be involved. For example, you need to have a budgeting plan in place to ensure you can afford repayments in the long term.

Examples of good debt include:

Taking out a loan to open a business or grow an existing business. With a business plan and budgeting plan in place, borrowing money to help build a business can provide financial stability in the future if the business succeeds.

For educational purposes, such as a student loan to attend university. Repayments will only need to be made once you’re earning a certain amount of money.

Applying for a low-interest credit builder card and sticking to the monthly repayments. Late or missed payments will affect your credit score negatively.

Taking out a mortgage to enable you to buy a home. A mortgage is a type of secured loan since it is protected by an asset (in this case it is the house) that can be used as collateral should you not fail to make the repayments.

At a later date, you may decide to remortgage your home to allow you to get a better interest rate. This can be made possible if you have acquired a better credit score since applying for your first mortgage.

What is Bad Debt?

Drawing of man chained to a debt wrecking ball

Bad debt usually occurs when you apply for unnecessary credit, such as a personal loan, and you haven’t planned how you’ll repay the lender.

Debt can also accumulate, turning into bad debt if you don’t have the resources to make regular repayments.

Examples of bad debt include:

Applying for a car loan. An item that isn’t considered a necessity, such as a new car, quickly depreciates in value and usually has a high-interest rate.

An instalment payment plan, such as a phone payment plan. If managed well and monthly payments are made, then an instalment plan can improve your credit score. However, if you’ve opted for a phone that costs beyond your means, then this may affect your ability to stick to the payment plan and it will negatively impact your credit score.

High-interest credit card. For example, credit cards that have a 20% APR or over will make your debts a lot more expensive and harder to repay.

Payday loan. This debt can come with extremely high-interest rates. This type of loan is designed for short-term use, so if you aren’t able to repay the amount when you’re next paid, then the debt will accumulate quickly.

We hope this blog has provided you with a clearer understanding of the differences between good and bad debt.

If you are struggling with debt and would like to find out if you qualify for an IVA, then get in touch with Swift Debt Help, and we’d be happy to assist.

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

5 Common Causes of a Decreased Credit Score

Written by Alex Swindells on July 5, 2022. Posted in Credit Score, Debt help.

Your credit score plays a big role in your life when it comes to making financial decisions. This is because there are fewer credit options available to you if your credit score is low. It can also be more difficult to acquire a mortgage, or to even rent a property, with a low credit score.

So, if your credit score decreases, then it’s very important to understand why, and how you can go about increasing it.

But what exactly is a credit score? And how is this figure calculated?

A credit score, also known as credit rating, is a number generally between 300 and 850, although there are some credit scoring models that go higher. The number is calculated based on information provided by credit reference agencies. This information is called a credit report.

A credit report contains details on a person’s credit history, such as the number of accounts they have open, their total number of debts, and their repayment history.

Credit reference agencies collect this information from utility companies, mobile phone companies, and mortgage lenders, just to name a few. The higher the credit score is for a person, the better it looks to lenders, and the more likely that person will be accepted for credit.

For example, if a person would like to apply for a credit card, the lender will check their credit score to ascertain whether they are eligible. Generally, the lower the credit score, the higher the interest will be.

To help you, we have put together a list of 5 possible causes as to why your credit score might have decreased.

We advise monitoring your credit report regularly, so that you can keep track of your credit score and notice if/when it decreases. If it does, then it could be due to any of the 5 reasons below.

1. Making large purchases on your credit card

person making large purchase using a credit card

If you use too much of your available credit limit, then this could signal to lenders and/or credit reference agencies that you aren’t in a financially stable position. However, using too little or no credit could also affect your credit score.

You should try to find the right balance between spending too much and not enough to help you limit the negative impact on your credit score. It is recommended that you use around 30% of your credit, and that you make regular repayments.

If you do decide to make a large purchase on your credit card, ensure that you are able to repay the full amount as soon as possible, so that you don’t incur too much interest.

2. Missing credit card payments

When checked by agencies, your payment history plays a major role for the credit scoring models they use in determining your credit score.

A 30-day missed payment can have a negative impact on your credit score. If you have a high credit score, then the amount the figure drops will be greater than it would be if your credit score was low.

Additionally, if you have gone into arrears on one of your accounts because you have missed multiple payments, then this can drastically affect your credit score for a number of years.

However, the decrease in your credit score because of missing one payment can easily be fixed. If you are late with a payment but you manage to keep on top of your payments thereafter, it shouldn’t be long before you see an increase in your credit score.

3. Paying off loans

Although it is a good idea to pay off some debt in full, this can have a negative impact on your credit report by causing your credit score to decrease.

This is because credit scoring models prefer you to have a mix of credit types to prove that you can adhere to the agreements made. The more credit you have available, and as long as you’re managing it sensibly, the higher your credit score will be, which will help to show lenders that you are trustworthy.

4. Applying for new credit

If you apply for new credit, such as for a new credit card, then lenders will carry out a hard check. A hard check is when a lender pulls your credit report because they want to ascertain whether you have a good credit history. This hard check can lower your credit score by a few points.

If you’ve recently applied for new credit, then consider waiting at least three months before applying elsewhere.

When applying for new credit, you can limit the impact it may have on your credit score by requesting lenders to carry out a soft check.

A soft check does not affect your credit score and other lenders cannot see when one has been carried out. A soft check is not always possible, but it can be worth enquiring about it before applying for new credit.

5. Closing an old bank account

It is not uncommon for people to find they have old, often unused accounts that still appear on their credit report. Whilst you may think that closing these may be helpful, it could actually harm your score as the presence of older accounts can be a positive thing as they can increase the average maturity of your credit profile.

However, it is important to check that any historic accounts do not have any forgotten outstanding balances, even if they are small amounts, as these could be negatively impacting your credit score without you realising.

If you’re struggling to improve your credit score, then you may want to consider alternative financial solutions, such as a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA).

To find out more about these debt solutions, please contact us, and we’d be happy to help.

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.