Category Archives: Debt

rebuild credit score

How to Rebuild Your Credit Score in 9 Simple Steps

How to rebuild credit

The importance of your credit score can’t be overlooked, especially given the fact that it determines your ability to access credit.

When you have a bad/poor credit score, you will have a hard time getting credit cards and loans such as car loans, mortgage loans among many other types of loans. If you are lucky enough to get a loan and you have a poor credit score, you will have to pay more than usual. It is, however, possible to rebuild your credit score as credit blacklists do not exist in the UK.

Below are some important tips/steps to follow when you want to rebuild your credit score.

1. Understand that credit scores are about behavioural prediction 

To be able to rebuild your credit score, you need to understand why you ended up with a bad score in the first place. Credit scoring/rating is about predicting the future behaviour of borrowers based on their past. Lenders have algorithms which attempt to predict the future behaviour of potential borrowers based on past borrowing and repayment habits. You most probably ended up with a bad score because of failing to make your loan repayments on time or failing to make them at all. To rebuild your credit score, you must purpose to meet all your loan obligations on time going forward so that your behavioural predictions change favourably.

2. Don’t send too many applications in a short period of time

To rebuild your credit score, you also need to understand that the system is against shopping around. Instead of applying for all short term loans you come across, it is better to do your analysis and apply for the best. There is evidence indicating that sending too many applications especially over a short period of time can have a negative effect on your future credit score. 

3. Use eligibility checkers before applying for loans/credit

Loan eligibility checkers map your score against the lending criteria of different lenders and show your probability of qualifying for certain products. Using eligibility checkers is a great way to rebuild credit because it minimises the number of applications. Considering sending too many applications can have a negative effect on your future score, this tip is crucial for anyone keen on rebuilding their credit score. 

4. Make consistent applications

It’s also worth noting that many loan/credit applications are rejected because of inconsistencies and this usually has a negative effect on a person’s future credit score. In the UK, most lenders use anti-fraud agencies like CIFAS and National Hunter to identify inconsistencies common in fraudulent applications. Inconsistencies range from using different job titles to different names and mobile phone numbers at the same time. In case you have more than one job title and/or mobile phone number, use the same when applying for all long-term and short term loans going forward to be able to rebuild your credit score consistently. 

5. Check all of your credit files often

To be able to rebuild your credit consistently, you need to know how you are progressing. The UK has three main credit reference agencies namely; Experian, Equifax and CallCredit. These agencies have plenty of data on everyone who has used some form of credit history. It’s, however, worth noting that these agencies may have wrong/incorrect/outdated information that may still be used directly or indirectly to calculate your credit score/worthiness i.e. an old mobile phone contract you forgot updating to your new home address. It’s, therefore, important to keep monitoring your credit files to ensure everything is updated/correct. 

6. Apply when the time is right

Building your credit score also has to do with applying for loans when the time is right. It’s worth noting that bankruptcy and County Court judgments stay on credit files for 6 years. Applications stay for one year. To ensure you don’t send too many applications at once which are likely to be rejected and in turn damage your credit score further, if possible, wait until County Court judgments, bankruptcies and applications have been cleared from your file before making new applications. 

7. Use your credit card(s) often

This is by far one of the best and easiest ways of rebuilding your credit score. It’s worth noting that little credit history is bad because it makes it hard for lenders to conduct behavioural predictions and assess your credit worthiness. To rebuild credit fast and easy, spend at least £50 using your credit card every month and ensure you repay in full. This tip is great because you rebuild your credit without incurring any costs since you repay everything in full and on time. 

8. Never miss or default on your credit repayments

This should go without saying. Missing or defaulting on credit repayments is the most common cause of a bad credit score. As a result, you must pay all your debts in time going forward if you wish to rebuild your credit score consistently in the future. You can build your score faster by paying more than required every month.

9. Challenge unfair defaults

In case you defaulted on your repayments because of wrong-doing by third parties i.e. you couldn’t pay for goods you didn’t receive, it is possible to challenge defaults arising from such circumstances by launching a claim with your lender or by writing to the credit reference agency. Credit companies are willing to review unfair defaults but it may take some time. If that doesn’t work, you can forward the case to; financial–ombudsman.org.uk for a final verdict.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

uk bankruptcy

Causes of Increased Bankruptcy Cases in the UK. Business and Personal

Business bankruptcy in the UK

Bankruptcy happens to thousands of businesses and people in the UK every year. According to the latest statistics from the office for National Statistics and The Insolvency Service, over 10,000 UK businesses went bankrupt last year. That’s 14,629 to be exact. This is a shocking statistic considering there hasn’t been a riskier time for businesses in the UK. 

Statistics indicate that it has become easier for UK businesses to become bankrupt and get hit with County Court Judgments’ (CCJs). 2016 doesn’t look any better considering 3,694 and 3,617 businesses went bankrupt in Q1 and Q2 respectively. The increasing bankruptcy rate for businesses in the UK can be attributed to many factors like the increase in compulsory liquidations which hit the highest level in the 1st quarter of 2015. 

Individual bankruptcy in the UK

UK businesses are not the only ones of the receiving end. The total number of individual insolvencies in the UK has also increased. The increase can be attributed to factors such an increase in the number of debt relief orders due to factors like changes in the eligibility criteria. The highest individual insolvencies in the UK are experienced in North East, East Midlands and South West UK. The lowest rates are experienced in the east, south-east and London. 

In regards to gender, UK men have a higher probability of being bankrupt than women. This is despite the fact that there are more women than men in the UK. According to 2010 census statistics, women account for 51.2% of UK’s population. Men, however, account for more than 50% of individual insolvencies. 

Causes of individual insolvencies in the UK

The main causes of individual insolvencies are; loss of income or unemployment as well as excessive use of credit. Relationship breakdowns and ill health are also contributing factors to high individual bankruptcy rates in the UK.

Causes of business bankruptcy in the UK

1. Financing problems

This is by far the most common cause of business bankruptcy in the world, let alone in the UK. Like many small businesses globally, small businesses in the UK have problems getting affordable capital. Most of the capital available today for UK businesses is very expensive for businesses which aren’t already thriving. Considering most startups struggle to get afloat so they are forced to take up expensive short term loans because they have no choice, it’s easy to see why so many UK businesses are going bankrupt. There are very few UK startups that are able to survive after taking up expensive business loans. Although the UK has government grants for small businesses, accessing them is very difficult. Startup owners are therefore forced to take up expensive loans to survive the initial challenges facing all startups.

2. Economic instabilities (BREXIT)

Another main cause of increasing business bankruptcy cases in the UK is economic instability. It’s worth noting that businesses succeed when the economy is stable. If the UK economy is booming, UK businesses will follow suit since people are more certain about the future and they have more money to spend. Unfortunately, the UK economy has been unstable since BREXIT came along in 2015. The European Union Referendum Act caused jitters up to the final vote and is still causing jitters going forward since the UK voted to exit the European Union. The UK people aren’t quite sure what the exit means to their financial future. As a result, they have continued to decrease spending which is hurting businesses even further. 

3. Bad economic cycles for some businesses

UK’s retail and wholesale businesses were the worst hit by bankruptcies in 2015 given the fact that 2,259 businesses went bankrupt in this sector. Online retail businesses have overtaken traditional retail and wholesale businesses in the UK forcing them to go bankrupt and close down. Regardless of the performance of UK’s economy going forward, traditional retail businesses will continue to have a hard time staying afloat.

Other reasons for increasing business bankruptcy in the UK

Poor decision making and poor tax management are other reasons why many UK businesses are filing for bankruptcy today. Most startup owners can only blame themselves for making poor business decisions like expanding too fast, renting expensive premises etc. Poor tax management is also to blame in instances where business owners let taxes accumulate to unmanageable levels and then end up being unable to pay. The UK has many of these cases.

Summary

From the above information, it’s easy to see why there are increasing cases of business and individual bankruptcy in the UK. From an individual standpoint, many people in the UK are taking up to much credit that is eventually becoming unmanageable. Loss of income and ill health are also to blame. From a business standpoint, capital problems, BREXIT and bad economic cycles for some businesses have contributed the most to high business bankruptcy cases. Businesses need to consider more affordable financing to avoid bankruptcy. It’s also important for UK businesses (especially small businesses) to expand/operate with prudence and move with the times. 

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

homeowner debt

Average Household Debt In The UK, A closer Look

The Money Charity has recently revealed results of a study into UK finances.
Their research has been ongoing since 2005 and gives an overview of the average
household debt in the UK. The overall findings were that debt in the UK is
£1.476 trillion as at the end of May this year. This is an increase from
2015’s figure of £1.439 trillion (£773.78 per UK adult).

average household debt

The report has shown that significant debt is commonplace and growing in the UK
with each household on average owing £54,740. Whilst this figure includes
mortgages it is still a large burden of responsibility on UK adults and equates
to an average of £29,266 per UK adult and each figure is an increase on last
year and even in some instances on the previous month.

Forecasts show that the level of UK household debt shows no signs of abating as
predictions from the Office for Budget Responsibility in 2015 suggested it could
reach £2.551 trillion by the first quarter in 2021. This would make the average
debt by then reach £94,981 per household, based on the current number of UK
households.

Debt in the UK can’t just be levelled at mortgage payments as the figures for
consumer credit show. The average consumer credit borrowing was £3,649 in May
2016 and again this had increased on the previous month. Credit card debt alone
reached £67 billion in May 2016 which equates to £2,397 per household. Paying
the minimum payments alone would mean it could take around 25.5 years for each
household to repay their debts in full.

Lending rates in May also showed an increasing picture with the amount loaned to
individuals by banks and building societies rising by £4.3 billion –
equivalent to £143m a day. Mortgage lending and consumer credit lending both
demonstrate and increase of £2.8 billion and £1.5 billion respectively.

At the other end of the spectrum a large amount of debt is written off by bank
and building societies. In the first quarter of 2016 this was £624 million with
over half this amount being credit card debt. For those in serious financial
difficulties there were 20,382 individuals declaring themselves bankrupt in the
first quarter of 2016 across England and Wales. This is the same as 226 people
per day and is an increase on the previous quarter, albeit a 2.2% decrease on
the previous year.

To match the trend of increasing financial woes in UK households the Citizens
Advice Bureau also reported a rise in contact with those that are struggling to
make ends meet. They dealt with 4,495 new cases of debt problems during each day
of quarter 1 up to March 2016.

The general picture of UK debt is certainly one that it is increasing and
expected to increase over time. Whilst this isn’t necessarily an encouraging
summary it demonstrates a need for responsible lending as well as people taking
control of their finances appropriately rather than spiralling into debt that
they have no chance of paying back. Positive news for many homeowners is that
interest rates remain low at 0.3% and so mortgage payments aren’t likely to
dramatically increase. Whilst the increasing reliance on credit may be worrying
it seems to be a pattern for many people as well as being anticipated by
Government.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.