SimplyFinance - Loans

How to Beat the New Year Credit Challenge

2009-12-23T00:00:00Z

If the phrase "New Year, new you" makes you want to crawl back under the duvet, it's time to wake up and smell the coffee - especially if you're planning to use credit to fund your lifestyle.

Cars, homes and even the weekly groceries are set to get more expensive, while borrowing criteria become increasingly tough as the recession bites.

Here are five financial challenges you could face - and some simple tips for tackling them.

Finding it harder to obtain credit

There's less money available to lend and great concern within both government and lenders about people building up amounts of debt that they are unable to pay back. As a result, credit is increasingly hard to get unless you have an excellent credit rating.

* Get to know your credit report - the history of your credit accounts, from cards and loans to catalogue and mobile phone contracts, plus your repayment record. Lenders read it when they assess whether you would be a good borrower, so it's important to ensure that it's up-to-date and accurately reflects your circumstances. Check your credit report is in good health with a free 30-day trial of CreditExpert.
* Look for errors and ask the relevant lender to amend them - for example an incorrect address could affect your credit rating.
* If special circumstances, such as a major illness, were at the root cause of past payment problems, ask to add a note of explanation to your report.

The VAT rate goes back up to 17.5%

New Year's Day sees VAT return to its normal 17.5 per cent level - which means an extra 2.5 per cent on almost everything you buy. It's a minor annoyance when you add more than two pence to every pound you spend on everyday items, such as a take-away coffee or a bar of chocolate, but if you?re planning to buy major items such as a cooker or a sofa, it can really hurt.

* Review your budget and increase the amount you allow for basics such as clothes and dry cleaning - almost everything except kids' outfits and non-luxury food will go up.
* Research the best interest-free or low-interest credit deals on major items carefully before applying. Do not go for every deal in the hope that one lender will say yes, because your credit report will record all of these applications. These can make other lenders nervous that you're overstretched, desperate or even planning a fraud - and that?s bad news for your credit status.
* If you ever go into the red at your bank, get an overdraft limit approved - you'll pay far less interest than on unauthorised overspending and you'll protect your credit rating.

Cars will get more expensive

The government's scrappage deal - which subsidised people swapping an elderly car for a new, more efficient one - is ending and a new showroom tax will increase the duty that you will have to pay on nearly all car models. On top of that, fuel duty will rise by one per cent above inflation from 1 April. It may not be a good time to need a car - but you can still get around.

* Do you really need your own car? A car share, car pool service, public transport and occasional car hire can make a cost-effective alternative. Ask friends and family if you can club together, see if you can share transport with work colleagues and be honest with yourself - a car may be nice but it's often not essential.
* Shop around for car finance, and don't assume that the garage's own finance deal will always be best value. Apply to speak to a car loan adviser through the SimplyFinance website, check price comparison websites and investigate a personal loan from your own bank too - but be aware that you?ll need a great credit rating to qualify.
* Take simple steps to boost your credit score. For example, register to vote at your current address, as lenders use the electoral roll to check that you live where you say you do.

Stamp duty returns for first-time buyer properties

The stamp duty holiday on homes worth between £125,000 and £175,000 is coming to an end and adding an extra one per cent to what you actually pay - that's £1,250-£1,750 more you have to find. But the bigger problem is building up a sufficiently large deposit to qualify for a mortgage in the first place.

* Save every penny and see if your family can help you out with a deposit - it's becoming the norm, now that many mortgages aren't available unless you can put up around a third of the purchase price.
* Boost your credit rating by closing unused accounts, challenging entries in your credit report that you disagree with, making all your repayments on time and resisting the temptation to open new credit accounts unless you really need them. You'll get an overview of what you can do when you check your free Experian credit report.
* Order your Experian Credit Score for just £5.95. It will give an indication of how lenders might regard you and will show the impact your credit history has on your credit rating. Find out more about your credit score.

Credit card repayments will soon be rising

There are concerns that too many people are making the minimum repayments on their monthly credit card bills, which means that even relatively small amounts of borrowing could take decades to clear. As a result, many card providers are set to increase minimum monthly payments.

* Never skip a repayment or pay less than the minimum amount. You could incur penalty charges and fees and, because you've broken your agreement with the credit card or loan company, you might have to pay higher interest in future. On top of that, your missed payment will remain on your credit report for six years, warning other lenders that you may not be a reliable borrower.
* Talk to your card issuer if you think you may have problems making repayments. You may be able to reschedule your payments or take a temporary payment holiday.
* If you're worried that you're in a real financial mess, get debt advice. Reputable organisations include Citizens Advice at www.adviceguide.org.uk, National Debtline at www.nationaldebtline.co.uk or the Consumer Credit Counselling Service at www.cccs.co.uk, or apply to receive a callback from an experienced debt adviser through the SimplyFinance website.

Top Tips for Dealing with Identity Theft

2009-08-03T23:00:00Z

It's a shock to discover that your identity had been stolen and used to borrow money and run up debts in your name. Perhaps you receive a letter demanding payment for an account you didn't set up, your credit card statement shows a series of unfamiliar transactions or a lender turns you down on the grounds that you've not been paying your bills. Identity theft affects hundreds of thousands of people in the UK each year, and the numbers are constantly growing.

If you don't check your credit report regularly for suspicious transactions, it could be a long time before the companies notice that there is something untoward happening, by which time your finances and credit rating could have seriously suffered. Research by Experian's Victims of Fraud team shows that it takes an average of around 500 days to discover the crime - and a further 300 hours to set the record straight. In the meantime, you could find it impossible to borrow what you need because your credit status has been trashed by criminals. Here's what to do if you suspect you might be one of the unlucky ones.

Check your credit report

This is your personal credit history and details the loans, cards, mortgages and other credit accounts in your name, along with your repayment record. If you spot anything you did not apply for or see an outstanding balance far higher than you can explain, someone is probably using your identity to commit a fraud. You can see your Experian credit report for free with a trial of the credit monitoring and identity protection service CreditExpert.

Report your suspicions

Tell the police if you think your identity has been stolen and used fraudulently and get a crime number or incident number. You should also tell one of the credit reference agencies that holds your credit report - Experian is the UK's largest.

Get help

The Victims of Fraud service will help you to investigate and put matters right. They can tell you what to do and help you to set the record straight. If appropriate, they can also add security features to your credit report to obstruct the fraudster and prevent him or her from running up more debts in your name. Call the Victims of Fraud service on 0844 481 8000 to report a possible case of indentity theft.

Contact the organisations who have been duped

Your credit report contains a list of all the lenders who've given you credit, along with their contact details. Get in touch with them and explain what's happened. Be prepared to provide proof - for example, that you could not have been in the place where credit card transactions occurred or that you do not live at the address given for a fake account.

Tell the Post Office

The most common way of stealing an identity in the UK is intercepting your post, so unless you've already identified the cause of your problems you should contact the Post Office and ask them to investigate. In the meantime, make sure your mail isn't left where anyone else can take it, like in a shared hallway.

Take precautions

Your identity is a precious commodity, so take every precaution to ensure that it isn't abused again. For example, you should shred sensitive documents before throwing them away and always report the theft of items such as credit cards, passports and driving licences as soon as possible after the incident occurs.

Who is using your Details?

2009-12-02T00:00:00Z

There has been a 12% rise in the number of cases of identity fraud since the start of the year. Data collected by National Hunter, the fraud prevention database operated by credit reference agency Experian, shows that there were 13.37 cases of identity fraud per 10,000 applications in the July-Sept period. This is compared to the January to March period when there were 11.91 cases per 10,000 applications made.

Fraudsters use the details of unsuspecting consumers to make applications for credit cards, personal loans and mortgages, with many people not realising their details have been used until they unexpectedly get turned down for credit.

Darryl Bowman from CreditExpert.co.uk, the website run by Experian, says: "The surge in cases of identity fraud is very worrying. As we get wiser to protecting ourselves from fraud, it's clear that criminals are working even harder to steal our personal details so they can apply for credit.

"Missing post, unexpected phone calls and strange emails are signs we look out for and know suggest potentially fraudulent activity. Criminals also know this and that's why they use techniques that can take a long time to detect. A new catalogue account at a new address could be the stepping stone to much more significant lines of credit and ultimately a much bigger problem for the victim to resolve."

The best way of preventing identity theft is to ensure that you only enter your details onto trusted websites. Any sites where 'https://" is not included at the start of the address are not secure, and therefore could be accessible by fraudsters.

Never provide any personal details in response to a bank's emails - banks would never ask you to email them with this kind of information, and would never even ask you to provide a full password over the phone. Con artists use a system called 'phishing' to create fraudulent emails and websites that look like they have come from banks and reputable companies, with the aim of fooling you into parting with valuable information. If in doubt, don't divulge any information, and call the bank/company back on the number provided on their website to verify.

However, your details are not just at risk online. Anyone who lives in accommodation with a shared hallway needs to be careful that their post is delivered directly to their door to avoid it being intercepted. Shred any mail giving account details, and other sensitive information such as your place of birth, date of birth or mother's maiden name.

Of course, if you do not tend to make credit card applications very frequently, you are unlikely to find out that you have been a victim of identity fraud until months, even years, after the damage has been done. Therefore, it is advisable to keep an eye on your credit report. If you subscribe, you receive notifications any time a credit check is made (suggesting that an application has been made on your behalf) or any other changes occur.

Even having a one-off glance can make all the difference, because mistakes and recorded transactions that you don't remember making can be sorted out very easily. You can see your credit report for free with a 30-day trial with Experian, or can apply to any of the UK's credit reference agencies (the main ones being Call Credit plc, Experian and Equifax) for a one-off copy for a couple of pounds.

Are you guilty of the Credit Report Seven Deadly Sins?

2009-11-30T00:00:00Z

Five years ago, most people's attitude to their credit status was, "It must be OK - I'm always being offered cards and loans." Today, things couldn't be more different. Banks facing the combined effects of the credit crash and recession have tightened their lending criteria so that only the cleanest credit report will qualify you to borrow what you need.

A clean credit report is a golden asset but very few of us realise that we could inadvertently be trashing our credit status - and our chances of getting the deals we want. Below are some surprising ways in which you can damage your credit rating - and a guide to how not to fall into the traps.

Deadly Sin no.1: Not knowing what affects your credit status

Lenders use a wide range of data when they decide whether to make you an offer, including details of your salary and how many people you support financially. They turn to your credit report to assess whether you are stable and a reliable borrower.

Your credit report lists your credit, such as cards, loans and your mortgage, along with your repayment record. You need to check it regularly to ensure that it's up to date and accurately reflects your circumstances. It's free to see your Experian credit report with a 30-day trial of CreditExpert.

Look for:
 
* Minor clerical errors, such as an outstanding balance you know you paid.
* Inconsistencies in the way your address is listed - for example, Basement Flat, Flat B and Flat 4.
* Applications and accounts you don't recognise.

If you find anything you disagree with, take it up with the relevant lender and ask for it to be correct - be ready to provide proof.

Deadly Sin no. 2: Not being credit-wise when moving home

You may think that a move is something to celebrate - but your big move is fraught with dangers for your credit record.

Remember to:

 * Make any big credit applications before you move - lenders prefer you to have lived at the address you give for at least three years and you could lose valuable points from your credit score if you leave things until after you've settled in your new home.
* Cancel gas, electricity, phone and cable contracts in writing, at the same time that you tell your bank, building society and other key organisations that you've moved. If you forget, the people who move in could run up bills in your name. A single missed payment stays on your credit report for at least three years, while a court judgement will blight your credit rating for six years. Use a service such as www.iammoving.com to make this process easier.
* Redirect your post via the Royal Mail for at least a year. If your mail continues to go to your old address and is intercepted, the newcomers could use it to hijack your ID, open new accounts in your name and leave unpaid bills.

Deadly Sin no. 3: Forgetting to adjust your finances when you split

Every time you apply for or take out a joint credit account, such as a mortgage or even a mobile phone contract, you create what is known as a financial association. All these associations are listed in your credit report and lenders may check your financial associates' credit report when you make an application, because their circumstances can affect your ability to repay what you owe. So if your ex gets into money trouble, you could suffer.

Add to your to-do list:
* Agree who will take on what debt.
* Cancel old joint accounts and set up new, individual accounts.
* Tell the credit reference agencies immediately - Experian is the largest - and ask for the financial association to be removed from your credit report.

Deadly Sin no.4: Not registering to vote

Lenders check the electoral roll as a precaution against fraud, to see that you really live where you say you do.

So, even if you have no intention of voting, you should:
* Cancel any past registration, especially if it goes back some years and several home moves.
* Contact your local council or go online to www.aboutmyvote.co.uk and register.
* Check that your new registration is shown on your credit report.

Deadly Sin no. 5: Having an emergency credit card

Lenders don't only take into account the amount you actually owe when they decide whether you should be given access to further credit. They look at the amount available for you to borrow.

Before you make an application:
* Go through your credit report and look for unused accounts.
* See if you can roll up several smaller outstanding amounts into a single account - for example, transfer the balances from several cards onto a single card.
* Simply cutting up the cards is not enough. Pay off and close down any accounts you no longer need or rarely use.

Deadly Sin no. 6: Not having any credit accounts

You might think that lenders would love people who haven't borrowed a penny or have long since paid off what they owe and shut the accounts down. In practice, this means that you don't have a recent track record that shows you are a reliable borrower - and you could be penalised.

Consider:
* Taking out a credit-building card, using it for everyday shopping and repaying the total, in full, every month. Missing payments is as bad as having no credit history at all.
* Talking to your bank manager and getting a personal reference if you want a loan or find it difficult to qualify for a card.

Deadly Sin no. 7: Making multiple credit applications in a few months

Never window shop for a new loan, card, mortgage or any other form of credit by making a full application - lenders will check your credit report each and every time and every check will leave a trace. Other lenders may interpret these as a sign of desperation or even suspect identity fraud.

Instead:
* Do your research in advance - use personal finance websites, newspaper supplements and magazines and go to price comparison sites to discover the kind of deal you might get.
* Ask for a quotation search that will not leave a mark on your credit report.
* Only put in an application when you're sure you've found a deal that is suitable and affordable.
* See what the lenders are going to see by checking your credit report first: See your online Experian credit report for free with a 30-day trial of CreditExpert.