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, mobile phones, car finance, and mortgages – than they are actively 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 the nation’s ability to take out credit. 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 personal finance.
Whether an application for credit is accepted or declined relies almost entirely on what’s on an individual’s Credit Report (in conjunction with ‘affordability’ tests), but unlike 1963, people are now more empowered by the ability to check the information on their report whenever they like.
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
Because of this increased need to borrow, it is more important than ever to ensure that your Credit Report isn’t holding you back when you apply for a loan, mortgage or any form of finance.
Many people will have taken out at least one form of finance in the last six years, and provided payments have been made on time, it should count towards a good credit history when viewed by prospective lenders. If you have not taken out credit in the past, 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.
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 severe errors, so it’s worth checking your Credit Report to make sure there are no mistakes being reported before you apply for credit.
Financial associations
If you have any old financial associations on your Credit Report that are no longer active (you no longer share a credit account with someone) you can remove them from your Credit Report. A Financial Association ‘ties’ your credit history to that of another person, and if they have a chequered credit history it is likely to reflect on you poorly when you go to apply for credit – and vice versa.
If you want to find out more about Financial Associations, try our handy guide.
Electoral Roll information
If you’ve recently moved you might not yet have had a chance to get on the Electoral Register. If you’re looking for another reason to do it, this information is hugely valuable to prospective lenders as a way of verifying your address. Without this information, you might struggle to find a lender willing to offer you credit.
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 three Credit Reference Agencies, not just one.
Remember: if you do decide to take out credit, you can make sure you get the best interest rates by making sure everything on your Credit Report is present and correct. That way you can borrow money while saving money at the same time.