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Being in debt may feel daunting, but it's how you manage it that matters. There are ways to make this easier. Learn how you can tackle your debt and build a healthy credit score.
When you apply for a credit card, loan, overdraft or mortgage, lenders will do a credit check. This includes how much credit you've been given and how you've managed your repayments. They will also factor in the information asked in your application. Based on this, they'll decide whether you're likely to repay the credit they give you.
Personal information - Name, ID number, date of birth, addresses and telephone numbers
Credit activities - Credit usage and repayment history
Public record - Litigation relating to recovery of debt, bankruptcy and winding-up petitions
Enquiry records - Members' reviews within the last 2 years
Credit score - A numerical snapshot of your credit report
Data not recorded on your credit report includes your employment history, savings accounts, criminal records, medical records, ethnicity, and religion.
Lenders use the information in your credit report to help them assess your financial behaviour. Using their own unique criteria, they review this data along with other information you may provide such as your job and salary, and then decide if you're a good candidate for credit. Typically, they're looking to assess whether you're likely to pay back what they lend you.
It's worth noting that lenders can only look at your credit report with your permission.
Organisations may also access certain aspects your credit report to confirm your identity to help prevent fraud.
You can build up your credit history by using a credit card or taking out a loan. Make sure you manage your borrowing responsibly (e.g. borrowing only if you can repay and making payments on time). This will demonstrate that you can have a responsible, ongoing relationship with a bank.
Always make sure you have enough money in your bank account to pay any bills being paid by Direct Debit or standing order. Set up some regular Direct Debit payments to pay bills such as your gas and electricity or your home insurance or mobile phone.
Make sure you pay all your bills on time, as a missed or late payment will count against you.
Being in debt costs money. There may be fees for taking out a loan or having a credit card. That's why minimising debt, as far as possible, is essential for your financial wellbeing.
If you are struggling with the high price of debt, you have several options:
Many people are in debt trying to pay for things that they can't afford, like a big home, a car, or even just eating out regularly. If this sounds like you, consider ways to reduce how much you spend.
Consolidate your debts
If you have multiple debts, it may be cheaper to consolidate these into a single loan if it means a lower interest rate. Be aware of fees. You'll need to consider if there are fees and costs associated with repaying or consolidating your loans. And if it will result in less debt to repay overall.
If you're struggling to pay off your debts, we're here to support you. Our specialists can work out a tailored repayment plan that meets your needs. Learn more
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