Tag: Credit score

4 Benefits of Using Your Credit Card Sensibly

Written by Alex Swindells on October 13, 2022. Posted in Debt help.

Credit cards are common in our society, and many people use them to pay for a large range of things, from the weekly grocery shop to washing machines and other household appliances. But just because we know about them, it doesn’t mean we know about the benefits that come with them.

If you know how to use a credit card wisely, there are an array of advantages that they can bring you and your credit score.

Here are 4 benefits of using your credit card sensibly.

Benefits of a credit card

1) A credit card can build your credit rating

The amount you can borrow from Lenders, and the associated interest rates depends on your credit rating.

A credit rating is what banks and other lenders use to establish the risk of lending you money. The rating is typically a three-digit number based on your credit report. The credit report is a record of how you’ve maintained bills and paid off debts in the past. The higher the number of your credit score, the better the credit rating. Different credit reference agencies have their own scales when it comes to establishing credit ratings, so yours might look different depending on who you use.

Your credit card account and payment history form a significant part of your credit report. This means that using your credit card responsibly and paying it off regularly can improve your credit rating.

Better credit ratings can make it more likely that you can access lower rate, or higher value lending, such as a mortgage. They can also increase your chances of getting better deals on things like mobile phone contracts.

There are different ways of improving your credit score, but they can all help you with bigger purchases later on, including car loans.

2) Credit cards can give you extra security

When paying for things online, there is always the risk that the items you order won’t be what you expected, if they arrive at all. This is where a credit card can help.

By paying for online purchases through your credit card, you can have extra protection concerning those products or services. If you are unhappy with the service or product you have received, you can request a chargeback through your credit card company. This is because of Section 75 of the Consumer Credit Act 1974, which means you can request a chargeback for numerous reasons, including if the merchant has closed down or if the product doesn’t arrive to name a few. It doesn’t apply to debit cards.

For Section 75 of the Consumer Credit Act 1974 to be in effect, the purchase must be over £100 but under £30,000. However, you don’t need to have paid the full amount on your credit card.

This extra protection can also apply to booking holidays, such as in some hotels and airlines.

3) Credit Rewards

Using your credit card isn’t just about credit ratings and protecting your purchases, although they can be useful. You can get rewards by using it too.

Several credit card companies offer rewards to whoever owns the credit card when an eligible purchase has been made. By buying the likes of groceries and petrol on your credit card, you can gain credit card rewards through points for every pound spent.

Different credit cards can have different rewards available, with some offering cashback on items and others offering air miles. Reward points to be spent elsewhere, such as in restaurants or shops, could be another reward available for some credit cards.

For example, credit cards that offer air miles can be popular with people who have to travel frequently as they can offer discounts on flights. This can potentially apply to other elements of travel such as hotel costs too.

If your credit card offers cashback, it should be noted that some companies need you to log in to your account and have your settings allowing you to receive said cashback.

4) Responsibly using your credit card can increase your spending power

When using your debit card, you are limited to the amount of money you have in your current account, regardless of your situation or extenuating circumstances. With a credit card, you no longer have this issue.

By using your credit card responsibly, you can increase the amount of credit you have available to spend. This is particularly useful when an important purchase has to be made, or something immediately needs replacing, especially if it is an expensive item. Sometimes you just don’t have enough savings in your current account to cover unforeseen circumstances, and that’s where a credit card comes in. In the cases of those unpredictable emergencies, they can act as a safety feature so your life can continue, and you can pay off the money in manageable instalments later.

As well as increasing your spending power, using your credit card responsibly for a bigger purchase can also mean there are more rewards for you to gain on your credit card account, whether that be through cashback, points or air miles.

Remember, any credit borrowed from your credit card must be repaid.

Do you need help with credit card debt?

In January 2022, the average UK household’s credit card debt was £2100, which may increase as the cost of living rises.

There are various ways in which Swift Debt Help can aid you with your credit card debt, including offering advice to those who need it. Whether you need help to organise affordable payments, legal advice or just someone to talk to, we are here to help you get control of your credit card debt.

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.

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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.

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

Top 5 Bankruptcy Myths

Written by Alex Swindells on August 5, 2022. Posted in Bankruptcy, Debt help.

Have you been struggling with debt and looking for a solution to help you out of your financial situation? You may have considered bankruptcy but are concerned that there’s a stigma attached to choosing this debt solution. Well, there are a few myths regarding bankruptcy that we’re going to uncover in this blog, which will, hopefully, help you see a clearer picture of what bankruptcy involves.

Before we go into some of the bankruptcy myths, let’s summarise what bankruptcy is.

Bankruptcy is a legal status that allows you to obtain a clean slate if you’re in debt. You can file for your own bankruptcy regardless of how much your debt is; however, if your creditor decides to apply to make you bankrupt, then your debt needs to exceed £5,000.

It costs £680 to apply for bankruptcy. To pay for this as well as any other administrative fees some of your assets may be sold. Whatever money is left will be shared between your creditors to pay off your debt.

If you manage to repay all of your creditors, then you may apply to have your bankruptcy cancelled.

After twelve months, regardless of whether you’ve repaid all of your creditors or not, your bankruptcy should come to an end as long as you’ve stuck to the agreed terms.

So, what are the bankruptcy myths?

1. Everyone will know that I filed for bankruptcy

Once you’ve been made bankrupt, then it does become public information. The details of your bankruptcy will be published on two government-owned websites: the Gazette and the Insolvency Register.

However, unless your case is already high-profile, then it’s unlikely that the information will be published in your local papers.

So, people can search for the details of your bankruptcy and this information will be available for them to view, but they’d already have to know about your bankruptcy to do this.

2. You always lose your job if you file for bankruptcy

Are you wondering whether you should file for bankruptcy if you have a job? You may be concerned that your job could be affected.

Well, the impact bankruptcy has on your job does depend on the type of job that you have and in which sector you work.

For example, if you work in a bank or for the police, then your bankruptcy could affect your position. You might not necessarily lose your job, but the duties you usually perform may be changed.

However, in most cases, you are not legally obliged to share your bankruptcy with your employer. Ensure that you read your contract thoroughly to understand the terms set out by your employer. If you’re still unsure after checking your contract, then speak with your employer.

Your employer must treat you fairly. If they decide to dismiss you, then seek external advice to ensure that your employer has treated you fairly and to find out whether you can challenge the dismissal.

3. You will lose all of your assets

A lot of people tend to think that once a person goes bankrupt they will lose everything. This isn’t true.

If you go bankrupt, then certain items will be excluded from the assets that are sold to pay off your debt.

For example, any items that you need to be able to work, such as books, equipment, or even a vehicle, will not be taken from you. These items are known as ‘tools of the trade’.

Additionally, you will be able to keep any items that are necessary for you to function normally, such as clothes, furniture, kitchen appliances, and so on.

4. I’ll never be able to get credit again

You may have limited access to credit options for up to ten years after your bankruptcy has ended, or for as long as the bankruptcy stays on your credit record, which is usually for six years.

However, if you actively try to manage your credit report, then you can work at increasing your credit score.

For example, making all of your payments on time, taking out small loans and managing these well, and making sure you’re on the electoral register are all factors that can help to increase your credit score.

Additionally, you can do all of the above even while the bankruptcy is on your credit report.

5. Bankruptcy gets rid of every type of debt

Most types of debt are covered by Bankruptcy and you will be released from them when you are discharged. These include debts such as unsecured loans, council tax arrears, utility debt, However there are some debts that are not included within a bankruptcy that you are still responsible for paying. These include:

Debts gained by fraud
Money owed under family proceedings (maintenance and lump sum settlements)
Damages payable to anyone for personal injuries
Student loans
Court fines
Debts created after the bankruptcy order

We hope that this blog has helped you to decide whether bankruptcy is the right financial solution for you.

But if you wish to know more about bankruptcy, then Swift Debt Help can offer some further bankruptcy advice.

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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.

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