Unfortunately, we all don’t have a big pot of money tucked away. That means sometimes, we’ll need to borrow a bit extra to help us fund that big purchase we need. With interest rates at an all-time low, you would be forgiven for thinking you will find a decent rate. However, this isn’t always the case. You may have a decent income, but that isn’t the only factor taken into consideration. Your credit rating will also decide how much you will need to pay back. And a credit rating doesn’t only affect borrowing. According to this article, a poor credit score could see your insurance costs rise by 20%.
A credit rating is made up of many factors, including your previous borrowing history. So the less you’ve borrowed in the past, the harder you’ll find it to borrow now. It’s a kind of catch-22 situation. Some institutions won’t lend you any money until you’ve borrowed money…
How to improve your rating
One method is to take out a credit card. If lenders can see that you are able to repay your debts, there is a better chance of being offered a cheaper rate. Of course, some credit card companies may also be unwilling to lend to you, but others offer special credit building cards. One company that offers this service is Cashplus.
Cashplus offer you the opportunity of taking out a prepaid credit card. Your first step is to apply for a card. This shouldn’t be a problem as there is no need for a credit check and they have a 100% approval rate.
Once you have your card, you will then need to apply for Creditbuilder which will allow you to build your credit rating.
How does Creditbuilder work?
Cashplus don’t offer their services out of the goodness of their hearts. They, of course, charge a fee for you to have their card which you pay monthly. However, in the case of Creditbuilder, their fee is “lent” to you.
- Advanced Payment Solutions Ltd (APS) lends you a limited fixed amount which goes towards paying for all or part of a year’s use of the account, interest-free. The loan is paid to Advanced Payment Solutions Financial Limited (AFL), so no money changes hands and it’s never available to spend.
- Just repay the loan with 12 small monthly installments and we’ll pass on your payment history to the credit reference agencies.
- Make all your monthly payments on time and you’ll have shown that you can manage credit responsibly.
As the fee you pay shows as a loan, as long as you keep up with your payments, it will reflect well on your credit score.
Is it expensive?
Is it worthwhile?
If you don’t struggle to pay bills but need to improve your credit score, this is a decent way to start. However, if you find yourself struggling each month, it might be best to avoid taking out a card which will charge you. The Deluxe account seems expensive to me, and I would be surprised if many people load over £1000 onto the card every month. Personally, I would stick with the Activeplus option, and keep some cash in another account to avoid the £2 withdrawal fee.