Adulting · Money

How Does A Poor Credit Score Affect Your Day to Day Life?

Everyone should know the importance of sound money management and the detrimental effects of having poor credit. Sadly around 18 million brits are currently thought to be actively harming their credit score and risking their financial future.

How Does A Poor Credit Score Affect Your Day to Day Life?

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Recently the economic downturn due to the Covid pandemic has seen the increased strain on people’s incomes and has resulted in more people missing payments or falling behind with their prices on credit accounts due to reduced revenues or increased bills eating into the money they have.

What Is A Poor Credit Score?

There are two main credit agencies in the UK and a list of variables that make up whether or not al ender accepts your credit application. On Experian, anything under 800 is classed as poor, and 720 and under is very poor. Equifax rates poor credit scores as those with a score of 420 or below with very poor from 0-279.

How Does Poor Credit Affect Your Day to Day Life?

Whether you realise it or not, having a poor credit score can affect more than a simple yes or no for applications you make. The effects can be wide-reaching and have an impact on many different things in your life. However, having poor credit now doesn’t mean this is it for you. You can always change your score and work to improve it by keeping on top of payments. You can follow money bloggers, listen to a credit risk podcast or join forums to get inspiration from others on how to improve your credit score.

This post looks at some of the ways a poor credit score can impact your life.

Renting Accommodation

If you have a good credit score, you can have your pick of homes to rent. Because many landlords and letting agencies conduct credit checks before allowing you to move in, having a poor credit history could jeopardise your plans to relocate.

The prevelance of ‘comprehensive’ credit checks from companies such as Experian has made it possible for landlords to check your financial history before you move in. Over six years, they look for any financial mistakes, such as a CCJ or defaults, that may have occurred in your life.

This isn’t just restricted to those applying for a mortgage now. Everyone is aware of how a poor credit history and bad financial mistakes can stop you from getting reasonable mortgage rates or even a mortgage at all. But a poor credit score also affects your renting ability too.

Buying A New Car

Buying a new car isn’t cheap. Many people consider financing their new vehicle with a personal loan to spread the cost over a more extended period. Personal loans are typically subject to a credit check. The same is true if you choose to go the traditional route and secure a PCP or hire purchase deal through a car dealership, in which case your credit would also be checked.

For the most part, if you’re entering a financial agreement with a company – whether it’s to finance a new car, a new sofa, or anything in between – you’ll almost certainly be asked to provide information about your credit history.

Applying for Jobs

If you apply for a job in specific industries – for example, if you’re involved in financial transactions or cash handling – the employer may run a credit check on you before extending you the offer. This is solely due to the nature of the employment you’re seeking, and it is not a common practice in the recruitment industry as a whole.

Careers that require good credit include;

  • Accounting
  • Police
  • Army
  • Legal

Higher Interest Rates

The better your credit score, the lower your interest rates will be. Lower rates and a good credit score means you are more likely to pay back what you owe on time as per your contract. A lower credit score is reflective of missing payments and bad financial decisions. So frequently, lenders will offer a higher interest rate to mitigate the risk of lending. Meaning, you are paying more money back as a buffer in case you default.

Insurance Premiums

Do you have household or car insurance? Or how about life insurance? All the insurance premiums you are offered will be based in part on your credit score. Much like with loans, the more chequered your history, the higher your payments will be. If you are paying a lump sum upfront, you can usually eradicate this. However, if you make monthly instalments, you are being credited the insurance premium you are paying back, thus accounting for the higher interest rates or increased premiums.

Household Bills

Whatever your mobile phone tariff or utility bills, if you’re looking to set up a Direct Debit to pay your bills, it’s likely that your credit report will be scrutinised as part of the process.

When it comes to paying your bills, you’ll most likely have no issues whatsoever. If, on the other hand, you have a poor credit history – for example, if you’ve defaulted on a loan in the past – your utility company may require you to have prepayment meters to avoid running up bills meaning you end up paying more than direct debits.

New Relationships

While this might not be a make or break topic for new relationships, it can impact budding relationships, especially if you haven’t gotten your financial situation under control. People want to know what type of person you are embarking on a relationship with and your credit history and money habits play a big part in this. If you have experienced financial difficulties you have recovered from, you may find this isn’t an issue. But if you are exhibiting poor financial choices and errant behaviour as far as your credit is concerned, this can be a warning flag in a new relationship.

On the face of it, a poor credit score can simply look like being refused credit. However, suppose you fail to make amends and improve your credit score. In that case, you may find that you are experiencing the effects of this in other areas of your life, such as getting preferable energy rates or being able to advance your career or maybe even pursuing a new relationship.

Money

Understanding Your Credit Score

We all know we should work to have a good credit rating, but many of us don’t really understand what our credit score really is or how it is worked out. With a better understanding of this, you will be better able to understand how to have a strong score and what it means if you don’t. You may receive letters from companies like Wescot, but read on before you make any payments to them.

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What is a credit score?

A credit score is a number that summarizes your credit information in a credit report. The number you have will reflect how likely you are that you will skip out on a loan or a credit obligation in the future. 

Why don’t I have a credit score?

Credit scoring can only happen with enough credit information. With little to no credit history, you won’t have a credit score available. 

What are score factors? 

Score factors are provided with your credit score to explain how different items in your credit history have impacted your overall score. This can help you to understand what has had the biggest impact, giving you a priority for things to fix. 

How often do credit scores change?

Your score will change as your report changes, meaning it can change all the time as new information is added to your credit report. 

What is the credit score range? 

There are different credit scores with different ranges. Two different scores can represent the same risk level, as different agencies and lenders calculate their ranges a little differently. Your Experian score is the most helpful for you, as they will provide an explanation of what the score they have given you means to lenders and how they view your worthiness for credit. A good score with Experian means you’ll have a good score with lenders, even with a different method of rating. 

Does debt consolidation change your credit score? 

Does consolidation help credit score? Debt consolidation can help or hurt your credit score, depending on the method you use and how well you keep up with your repayment plan. Speak to a credit counselor to make sure you are making the right choice, and make sure you can keep up any monthly repayments to avoid further damaging your credit score. 

What is a good credit score?

A good credit score depends on the scoring system used by the lender in question. You can get a clearer idea of whether your score is good or not, by getting a score and report from Experian, which will help you understand your score. 

What information goes into calculating my credit score?

Credit scores use information from three main areas of your credit report. It uses your account information (including credit card, mortgages, and student loans), public records (such as bankruptcies or CCJs), and inquiries (requests by lenders to view your credit). Personal information like your gender, race, where you live, and your marital status are not taken into account. 

Does having too many credit cards affect my credit score?

Too many credit cards with either high balances or a lot of credit available can make you seem like a higher risk and can impact your score.

Money

Why Is Your Credit Score So Important?

There are a lot of adverts on TV about credit score checkers at the minute. It seems like everybody is always talking about how important it is to know your credit score and if it isn’t good, to fix it. But how important is it really? A lot of people don’t really bother about their credit score but at some point, it comes back to bite them because it is more important than you think. These are just some of the reasons why a good credit score is so important. Check out thefinanceshub.com to learn how to improve your credit score.

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Borrowing Money 

Spending loads of money on a credit card is never sensible, but there are times in life when you need to borrow money. Say, you’re buying a new car or you want to do home renovations, for example. It’s fine to borrow money in these situations and if you shop around for good deals, you will be able to manage the repayments. But if you have a credit score, you are seriously limited. You can still get quick loans from new horizons and other similar companies but you may not be able to borrow as much as you need and you will probably pay higher interest. Your credit score is essentially a measure of how responsible you are with money and if you have a bad score, people will not trust you enough to lend you money. If you find yourself in need of a loan for some reason, having a bad credit score will make life difficult for you.

Buying A House 

Buying a house is one of those times when you need to borrow money, and if you have a bad credit score, you will struggle. Your options for mortgages are very limited, if anybody will even lend to you at all. It’s likely that you will end up paying a very high interest rate on your mortgage if your credit is bad. That’s why it’s important to focus on your credit score when preparing your finances for buying a house.

Car Insurance

This is one that people often don’t think about, but it’s a big one. If you have a bad credit score, it can really push your car insurance up. This puts younger people in a tough position because their insurance is already high and they don’t usually have a good credit score because they have not had the time to build one up. However, it only affects you if you pay monthly, not if you pay the whole year in one go.

If you don’t know what your credit score is, you need to check it right away. You can do it for free at Clearscore. If your score is not very good, you should look at getting a credit card that is designed to boost your credit score. You can make small purchases and clear the balance right away, and that will push the score up. Beyond that, you need to make sure that you are budgeting your money well and not missing any payments on bills or loans because that will ruin your score again.

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5 Tips to Financing your Next Home

Everybody, once you become an adult, you would love to enjoy your private space. Having your own home is a dream come true for most people in the world. However, as we all know, that does not come easy. You have to be ready to work for it.

Money is the main factor that can limit you from making a down payment or paying the new house in full. You may need some help in this area. This article focuses on giving you five tips 

that you will need the next time you are making an investment of this magnitude.

Do you need a new home?

Any dream is achievable. However, you have to sit down and analyze whether you require this new home or not.

One of the things you have to analyze is your income. Most lenders will give you reasons why you should take a mortgage. You should nevertheless think about the risk that you are about to undertake. Even if you qualify for a particular mortgage limit, it does not mean that you can pay it off in time.

Thus, if buying a house can wait for some time, you had better do so.

Preparing to acquire the property

Once you think that you are ready to invest in a new home, you have to think of ways of investing in this new asset. If you do not have the ability to pay in full, then your other option is to look for a mortgage.

Before you even start the process, ensure that you prepare beforehand. For instance, you could try to work on your credit score. If it is low, then you lower your chances of getting a mortgage. However, if you can work on getting up, then you can increase your chances by a considerable margin.

A good credit score, by the way, can range between 650 and over. If it is below that, you can work towards improving it.

Look for various borrowing options

Here is where many people make mistakes. You can get the wrong option if you do not shop around to see the various options available. There are many lenders in this space, which means that you have to be keen when making a decision.

Here are the mortgage options you can consider:

– Use a private lender

If you have a poor score on your credit, you can look for a person or a private business that offers that. This is a good option for people that do not have documents required to acquire a mortgage.

– Make a deal with a homebuilder

Most home builders provide in-house mortgages, which you could also use. Nevertheless, you have to be keen when agreeing with these types of lenders.

– Using FHA mortgage

Most federal banks support these loans because they are affordable to many. Even when you have a bad credit score, you could get the mortgage as long as you make a 10% down payment.

Other financing options include rent to own, using your retirement account and crowdfunding.

Final remarks

Before you make any purchases, you have to ensure that you analyze your current situation. For instance, with a new home, you may have to adjust your current budget to help pay for the mortgage you just committed to repaying it. 

Remember also that people take years to finish paying off a mortgage. Therefore, ensure that you make the right decisions and consult professionals in this area.

 

 

 

 

 

Money

How To Have More Money FAST

When you’ve got a family, having as much money to play with as possible can help you to all live a comfortable life. You want to have the money to do things together and enjoy life, as well as enjoy some of life’s luxuries. Here’s how you can have more money FAST:

Have A Tight Handle On Your Finances

So many people don’t have much control over their finances at all, and wonder why they are always broke. Knowing what you have coming in and what you have going out will help you to see what’s going on more accurately. You can then make changes and tweak as you need to!

Cut Back On Luxuries That Don’t Make A Difference

Cutting back on luxuries might sound counterproductive if you want a comfortable life, but some things just don’t make a difference. Do you really need that expensive brand of toilet roll? Be smart and find ways you can cut back.

Give Allowances To The Kids

Instead of spending on your kids without a plan, consider giving them allowances. This will teach them about being good with money. Encourage them to save if they have their eye on something expensive. Not only will it teach them good life lessons, it’ll give you more money to spend on things to do together, while they take care of their own souvenirs, sweets, and other luxuries.

Apply For Credit

If this is an emergency, applying for credit could be the only way. If you have a good credit score, you should be accepted. If not, this infographic will tell you what could happen:


Infographic Design By MyCreditMonitor.co.uk