Credit score

After starting in the NHS and sorting out all the basic stuff as per each one priorities, you will get to the point where you have to have a pause and look at your finances and what do you want to achieve next, whether it is FIRE (financial independence, retire early), buying a house, investing, sorting out pension finances or just saving money and amounting interest. I have been reading on this and this is my collective experience so far.

This is going to be my first entry about Finances, saving and investing in the UK

Credit score

For me personally achieving financial goals starts with hopefully buying a house. So it all then starts with credit score and building it. I am going to mention the steps I have found that improve the score. 

It is the way lenders assess how likely you are to pay back the debt if they lend you money by taking a look at your past behaviour with other debts.

To find your credit score or report, or you need is to sign up to any of the big credit reporting companies, like Experian, equifax or TransUnion. Some banks through their applications offer access to credit scores. I personally use two, creditkarma and Exeprian. Creditkarma (access to transunion) gives you tips how to improve your score, integrated in your report. There is also clearscore app which gives access to equifax, i have not used it yet but the recommendations is to at least check the three of them once a year and how they score you.

Why is it important?

Credit score will influence whether u get a mortgage or not. The rate u will get it. It can also influence other aspects like when you apply for a car insurance and pay in installments, it influences the interests they charge you for those installments

1. Credit card

I find the easiest way to improve and sort out ur credit score is the credit card usage.  But applying for a credit card is one of the hard search applications that might leave an impact or an initial dip in your score which with frequent use of the credit card and more importantly always paying on time gets cleared and then moves up. The dip is because you are applying for a credit or aka loan to them. A lot of people claim that utilisation of around 25% is the best, you don't wanna be seen as maxing it out (using it to the absolute limit) every time as it shows you might be poorly handling the credit. You also don't want NOT to be using it, cause basically they look for the repayment history and if you have 0% utilisation they wont have access to that information.
One of the websites i was going through claimed that limits in the range of 4k with low utilisation is the best. You don't want also to have loads of credit cards with high limits that u r not using frequency as that might indicate that you have the option to go on a spending spree and not be able to pay back. To clarify one thing the score you see on ur account is the company projection on ur data but the lender who is looking at your application for a mortgage might have a different view than Experian for example so you don't want to be very comfortable if your score is good but there are potential things to improve in ur report.

THE MOST IMPORTANT ISSUE IS TO NEVER MISS A PAYMENT, which is called defaulting! Thats a big deal with a long term impact! If you feel you are not in control and struggling to pay on time, i think cancelling the card would be better than defaulting.

Also never withdraw cash in the UK with your credit card! Viewed very negatively that the person is struggling with finances!

To get a credit card the easiest way is get one of the bank accounts that offer this like HSBC advance (when i first came to UK everyone of my colleagues and friends were using that) it gives you a credit card but you have to pay in 1750 to avoid any fees. I have heard that Barclays have a similar one. Anyway as NHS staff you will find at least a couple banks offering a credit card with their account

2. Bank account

Its all about stability! So if you have held your bank account for a long time and some sources say 6 years thats the sweetspot!

Opening different current bank accounts shouldn't have an effect on ur credit score but opening too much (more than 2 in less than 6 months)might lead to a small dip and has no impact after 6 months as most resources say, so any of you bunch who wanna swap accounts to get the 100£ pound switch incentive feel free to. Just dont switch your main and first bank account. Obviously if you have an overdraft or using it is a bit different, which i will mention in the overdraft section.

3. Being on the electoral vote

Now some people like myself are not allowed to vote in the UK. I thought that this is a dead end for me but i was going through several resources that said even if thats the case send to the pain credit reporting companies and attach a note that you are not allowed to vote. I am in the process of doing that at the moment.

I also have to mention an interesting thing i came across that even if you have a good credit score without being on the electoral vote, still don't ignore it and try to get on it or send the note. The reason as i mentioned before the lenders might have a different weighing for being on the electoral vote than the scoring system other company uses

4. Rent reporting

It is a relatively new concept but useful for people like us (IMGs). We all pay rent, the vast majority pays before even the time the rent is due. The rent reporting companies (mainly one big one) have access to your bank account (read only) through the open banking system and when you pay on time or early it gets reported to Experian and you get that on your credit report. It shows that you are diligent in meeting the dealines. Let me stress that if you pay late or miss payments this is definitely going to affect your credit negatively. I am not sure if they treat late payments same as defaulting but if they do then it is not good news as defaulting stays on your report for 6 years, i will mention that when addressing defaulting. Below is my link to join creditladder for rent reporting and read about it if you want

https://www.creditladder.co.uk/join/2o8jyp0eQZKablg1

5. Loqbox 

I just came across this. I like the idea and i went through some trusted websites to look for reviews and seems legitimate. I have just applied for it so I don't have feedback from it yet. The idea as follows, you sign-up with with this company and you pay them any sum of money monthly (between 20 and 200), that money is yours, saved under your name and the money is locked for 12 months where it becomes unlocked then and you get the money back. Behind the scenes the company calculates the total amount at the end of the 12 months that you will be getting and puts it under the pretense of a loan that you are paying back monthly.

For simplicity lets assume i am going to put in 20£ monthly (which i just signed up to) they will put in 240£ as if that you got thay loan, which you don't have access to. Then you save/pay the 20£ each month and at the end of the 12 months you get the 240. In reality you just saved a 20 monthly. On paper to the credit companies you had a loan and you paid it back.

There are some tricks to it though, it still counts as load, so you will see an intial dip in your score. If you didn't pay the 20 it will count as defaulting and on the website it advises you, to cancel the whole thing if you feel you are going to miss a payment, it might affect you negatively cancelling this halfway but it is worse if you default.

The service as free as they make their money when they give you back the money, as they give it back in a new bank account (they take a fee from the bank), if you want the money in one of your accounts you have to do the premium subscription which costs about 30£ a year. For each friend you refer you get a 5£, and the friend as well. Unfortunately I didn't know anyone who is using it so someone lost referring me! Anyway my invite link is as follows

https://www.loqbox.com/en_gb/loqbox-invite/?code=WJ2M6W

And if you don't want to use the referral link as follows

Loqbox.com

6. Phone contract

Whether it is a phone or sim only contract. It still has a positive impact on your credit score. The way the communitication companies reports the contracts is like a loan you are paying back. It also shows that you are paying on time and don't miss a payment. Even if you are opting for one of the monthly contracts (i just did that) do it as direct debit (i haven't done that yet myself 😂 but will do soon) again showing committment and paying on time.

7. Overdraft:

Overdraft is either arranged or unarranged. Arranged overdraft is when you agree with your bank when you open a new account that you will have access to extra funds as a loan/credit in case you need it. Unarranged overdraft is for example you have no money in your account and you forgout and went to buy something with your debt card, your account will then be in negative to pay for that. That is unarranged overdraft.

It can happen to most of us particularly when you have one or two accounts, you have one for the bills and you just forget to fund it and u go into unarranged overdraft. Usually the bank will give you like 24 hours or more or less (depending on the bank, most give but someof them don't give any time at all) to pay the money bank with no fee (there is a fee for arranged or unarranged overdraft). If you dip regularly into unarrnaged overdraft, it will negatively impact your credit score, as it shows you are not budgeting properly. On the other hand if you have arranged overdraft, that you use and payback regulary on time, some websites (big ones), claim it will act the same as using your credit card and help build your credit score positively. I personally wouldn't be comfortable using it though, i mean credit cards are available and many are free , i see no point for me to go into arranged overdraft and pay fees (i didn't check the fees for it as i was never interested in it)

Utility bills and most regular payments are increasingly becoming a part of assessing the credit score but i haven't found any solid data on how they positively or negatively affect the score.

Just to repeat, most important is never to default ie never miss a payment particularly credit cards and regulary check your credit scores if you find any mistake call the reporting company. If you feel stuck and hitting a wall and want to escalate, it is the "financial ombudsman".

I will try to update or add on any relevant information if i come across anything useful. If anyone reading this has any questions please let me know