We're Now More Likely To Be Borrowers Than Savers

Posted by Sam Griffin in Personal Finance on 5 October 2018

UK Households are now more likely to be borrowers than savers, with savings at their lowest since 1963, according to a study by the Office for National Statistics. Households are increasingly borrowing more – by taking out loans, car finance, and mortgages – than they are collectively depositing into savings accounts.

The Office for National Statistics said that the amount UK Households managed to save from their disposable income fell to just 4.9% in 2017.

The reasons behind this trend include low interest rates and tight family budgets but as the national reliance on credit continues to grow, so does the importance of actually being accepted when applying. This news comes in spite of reports that millennials are not taking out credit, which could potentially be indicative of a wider generation gap than previously thought when it comes to attitudes to borrowing.

Whether an application for credit is accepted or declined relies to a very large extent on what’s reported on an individual’s Credit Report (in conjunction with ‘affordability’ tests). Back in 1963, borrowing was a different beast entirely, and lending decisions were carried out by people, not computers.

Those same technological advances in the way that information is shared and reported has also meant that its now easier than ever to check for yourself what is held about you, and what it means.

If you haven’t already, you can try checkmyfile free for 30 days, then for just £14.99 a month afterwards, which you can cancel at any time.

Getting ready to borrow

If you are part of this increased desire to borrow money and plan to apply for credit any time in the near future, it is more important than ever to ensure that the information on your Credit Report doesn’t hold you back.

Most people in the UK will find that there is account information reported on their Credit Report. That doesn’t necessarily need to be a loan, credit card or mortgage, as contract mobile phones, overdrafts and even some utility bills are commonly reported. The way that repayments have been made each and every month since those accounts were opened will go a long way to determining how likely a prospective lender is to say ‘yes’.

If you have not taken out credit in the past – either through personal choice or due to being too young - there are ways to build up your credit history, even if you don’t use a credit card to do so.

There are a number of things you can check on your Credit Report to make sure you have the best chance of getting accepted for credit when you apply – here are just a few.

Negative information

The main thing that is likely to curtail an application for credit is negative information on your Credit Report. The impact that an entry will have will vary considerably depending on what it is, but in every case, it’s not there forever.

Late payments, arrears, defaults and court information will remain on your Credit Report for a period of six years, after which it will be removed automatically. If a negative marker is due to be removed soon, you can time your application accordingly and in theory, it should be gone by the time the lender comes to check.

Incorrect information

It’s a legal requirement for lenders and Credit Reference Agencies to make sure that the information they are reporting about you is up-to-date and accurate and although mistakes on your Credit Report are rare, they do happen. These can range from something minor to more serious errors, so it’s worth checking your Credit Report to make sure there are no mistakes being reported before you apply for credit.

If you do come across something that needs amending, checkmyfile can advise you on the best course of action to take and in many cases, can dispute the information on your behalf directly with the relevant Credit Reference Agency.

Financial associations

Financial associations are created whenever you make a joint application for credit with another person. If you have any old financial associations on your credit report that are no longer applicable (you no longer share a credit account) you can apply to remove them from your Credit Report through a process known as a Notice of Disassociation. A Financial Association ‘ties’ your credit history to that of another person, and means that lenders will check both records whenever an application for credit is made.

If you want to find out more about Financial Associations, try our handy guide.

Electoral Roll information

If you’ve recently moved house you might not yet have had a chance to get on the Electoral Register, but it’s something you should definitely do each year. Lenders put a great deal of importance on the Electoral Roll, and especially where there isn’t a huge amount of other information on a Credit Report, it can be the difference between an application being accepted or rejected.

So, regardless of whether you would label yourself as a spender or a saver, it’s important to know exactly what is being held and shared about you – it’ll mean that when the time does come, you can apply for credit with much more confidence.

To see what lenders see when they check your Credit Report, try checkmyfile FREE for 30 days, then for just £14.99 a month afterwards, which you can cancel at any time online. It’s the UK’s most detailed Credit Report, with information from four Credit Reference Agencies, not just one.

If you come across anything you need help with, our professionally-qualified Credit Analysts are on hand 7 days a week to provide assistance and advice.

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