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Topic starter
13/04/2022 12:16 pm
Hi There,
I am currently just over 2 years into my trust deed. Its all going smoothly so far, however i had a question regarding credit.
I still have a shopping account with a small £200 limit, and ive also opened an account called Loqbox in which i pay £20 per month into a "savings" account, and they register it as a loan with the view to credit score improvement.
I recently contacted a mortgage advisor for future planning, and he recommended getting rid of these and having no credit whatsoever.
I have always been under the impression that having credit, with low utilisation, will improve credit score, and so by using these accounts i thought it would put me in a strong position come year 6 when the TD falls off my record, as i will still have some borrowing history. Am i wrong in this thinking, should i get rid of these accounts?
Many thanks in advance.
Liam
13/04/2022 2:47 pm
Hi Liam.
I was under the same impression as you actually, though am no expert on credit scores.
It is worth remembering that applying for a mortgage depends upon more than just your credit score, however. Affordability is a big part of it, so I guess someone using regular credit might be seen by some lenders as showing less affordability than someone who manages to save some money each month?
Scottish Debt Solutions Expert - Ask me for help setting up a Scottish Trust Deed or Debt Arrangement Scheme plan.
25/04/2022 2:50 pm
Hi Liam,
The first point regarding credit scores - they're essentially meaningless garbage. Nobody other than you sees the score, it's a marketing ploy and not based on any real, objective metric. How the industry has been allowed to use phrases like "your credit score is an important number" in advertising, I will never know. In my opinion it's a clear breach of FCA regulations, as well as ASA standards.
Each lender has their own criteria for who they lend to and how much they lend them. One of their criteria will relate to how you have utilised and behaved with credit in the past 6 years.
Whilst the likes of Loqbox are able to trick computer algorithms that provide "scores", actual lenders are smarter than this and recognise these for what they are. I would suggest though, that whilst there isn't any real benefit to using them, terminating the services and having a negative marker on your file may impact borrowing decisions.
Theoretically, using and repaying in full a small payday loan style revolving credit facility could "boost your score". However real lenders would normally see this as a red flag and could reject your application as a result.
My advice - don't borrow more than you need to, avoid unnecessary things on your credit report and live within a proper budget. This will make you a more desirable candidate for a mortgage in the future.
And to anyone on the thread - pay no attention to the score you see on experian/clearscore/credit karma. It's nonsense, has no real life consequence and will not impact lending decisions. Pay attention to the actual content of your credit file (late / missed payments, accounts in default, new accounts you don't recognise etc...)
08/08/2023 10:36 pm
@dbha21 If this is indeed true - i wonder why it is not common place to hear about it? The actual score dosent matter its the content of your actions good or bad.
