Tag: Borrowing

How to Pay off your Overdraft

If you have an overdraft then you may wish that you could pay it off or perhaps pay it off more quickly than you are already. They are different to other loans in the way that they work and it is important to understand how they do work and how you can save money by not using them.

An overdraft is associated with a current account. Customers that have a good credit rating will be offered the opportunity to have an overdraft. The amount will be set by the bank and they will be able to spend more money than they have in their account as long as it is within their overdraft limit. There will be an interest rate for this borrowing as well as possibly a fee as well. Some people manage to borrow more money than they have been allowed. This is known as an unauthorised overdraft and it will cost a lot more money, using having a one off charge and daily fee for being overdrawn. Each financial institution will have different ways of charging and will charge different amounts and so it is worth looking at their terms and conditions to check this before using the overdraft facility.

Having an overdraft can lead to problems though. Some people will go overdrawn every month due to the fact that they spend more money than they have and it can get worse and worse. For example if you go overdrawn by fifty pounds one month, when you get paid the debt will be paid off plus the fees and interest. Then next month you may find it just as hard to manage so you find you are fifty pounds short again. However, due to paying off the last month’s overdraft plus interest you will owe over a hundred pounds. If this keeps happening then you will get overdrawn more and more each month, until you have to go into a very expensive unauthorised overdraft to manage. It is therefore best to avoid going overdrawn if you can and if you are overdrawn pay it off as soon as you can. Otherwise it may not be long until you are so far in debt that your pay will not even pay off the overdraft.

It can be worth looking carefully at how much you are spending and what on. See where you can cut back on your spending so that you are not struggling to make ends meet at the end of the month. This may mean that you have to cut back on luxuries, find cheaper utility suppliers, shop in cheaper shops and perhaps making your own food rather than eating out, getting take away food or eating ready meals. You may also consider using a loan company such as Omacl.co.uk to help tide you over. Keeping a note of how much money you have and what you are spending really helps as well. You may not really be aware of where all of your money is going, but by looking carefully at bank statements and then noting down all purchases, you will soon get an idea of where you spend money and where you could potentially cut down. Make sure you are aware of any direct debits and when they go out of the account as well, so that you do not get caught out.

It could also be wise to find more ways to add income each month. This could mean taking on more work, perhaps doing some overtime or working a second job. It may even be worth looking to change jobs so that you have one that pays more. This may not be easy, but it is worth looking into and considering. It could make a big deal of difference and may be the only way that you will be able to pay off the overdraft.

It could be worth considering asking the bank to cancel your overdraft facility to help you not to use it when you do not need to. Sometimes it can be tempting to spend that money, even though you get charged for doing so and by cancelling it, you would be taking away that temptation. You would have to be very careful to make sure that you never went overdrawn though as an unauthorised overdraft could get you into even more trouble and so you will need to keep a very close eye on your bank balance and your spending, noting down everything that you spend.

Understanding Credit Scores and Credit Reports: A Borrower’s Guide

There is no question that your credit score plays a very important part in whether or not you get approved for the loans you want. Many people only have a very vague idea of what a credit score is and what it means. Because it is such a big factor in getting loans, you should make a point of learning all you can. This information can go a long way towards helping you to get the loans you need with minimal hassle.


Credit Reference Agencies

We will start off by discussing CRAs or Credit Reporting Agencies. There are three of these such agencies in the UK—Equifax, Experian, and Callcredit. These companies are in charge of keeping your individual credit reports and modifying them based on your credit activity. They take all of the information on your reports to generate a score, which is your credit rating. Lenders use these numbers to determine the eligibility of applicants.


Finding Out Your Credit Score

Credit scores range from 300 to 850 in the UK, and you can find out what your score is by going online. There are certain websites that you can use to do this, but you need to do your research. Make sure that you only use reputable, secure websites to get a copy of your credit report.

Equifax’s Report and Score service charges a small monthly fee, but you can take advantage of a free month-long trial. Some of the websites that offer this service are free while others will charge you something. You can get a free copy of your TransUnion or Callcredit report through their service, which is known as Noodle.

Experian gives people the ability to access their credit report for free through the Money Saving Expert Credit Club. You also have the option of getting the CreditExpert service for a monthly fee.


Why You Have Different Credit Scores

Because there are three different credit reporting agencies, you naturally have multiple scores. These scores are changing all the time based on numerous factors. Not all lenders report to every single CRA, but some do. You need to keep in mind that all three of these agencies have different maximum scores. Experian has a max score of 999, Equifax is 700, and Callcredit is 710. A lot of people go into a confused panic when they find out they have different scores, but it’s nothing to worry about. Just make sure that all of the information in your credit report is 100% accurate.


Do all Lenders Run a Credit Check on Applicants?

Yes, at least all legitimate lenders will run a credit check. You have probably seen a lot of lenders advertise “no credit check loans”. The truth is that they most likely do run a credit check, but bad credit is often accepted. Some lenders don’t pull applicants’ credit with all three of the major agencies. This is something that differs from lender to lender. Credit is something that almost always affects your ability to get a loan to some degree. A lender will consider your credit report as a whole before rendering a decision regarding your application.


Why Should I Check my Credit Report?

There are a couple of good reasons that you should get into the habit of checking your credit report on an annual basis. While it is true that credit report mistakes are pretty rare, they do still happen. It is important that you catch any errors on your report so you can get them taken care of as soon as possible. If you have unknowingly become the victim of fraud or identity theft, your credit report could be seriously affected. Checking your report will let you know if either of these things has occurred.


What is Included

You should know exactly what is or should be in your credit report. When you look at your report, you will see basic personal details like your full name, current address and birth date. You will also see whether or not you are registered with the electoral roll at the address you currently reside at.

All of your late payments will also appear on your credit report. Other things like missed payments, bankruptcies, and county court judgements are included as well. All negative marks are featured in this report, and they all impact your overall score.
What is not included

There are certain things that are not included in your credit report, such as your annual income, medical history, criminal record, student loans, and savings accounts.
Improving Your Credit

If you have a very low credit score, the good news is that there are plenty of effective ways to raise it. Make sure that you pay all of your bills on time consistently. Getting a credit card or loan and paying it off by the due date can also help you improve your credit score dramatically.