Recently I’ve become a bit obsessed with my credit score. I have the apps for Credit Karma which takes its data from Transunion and Clearscore, which pulls stats from Equifax; and I habitually check my score on both apps at least a couple of times per month.
This behaviour has come about, because just over a decade ago, I was a Director in a business that went bust. It left both Mrs B and I on a financial precipice and we had to take out an IVA each to fend off debtors.
It took us years, and I’m not exaggerating at that, to get through it and become solvent again During which time no one would give us a loan, credit or store card or in fact, any form of credit because as you may know, an IVA reduces one’s credit rating to zilch. An IVA renders you such a poor credit risk, that practically no one legitimate, will lend you any money.
In the midst of my IVA, a new mobile phone was needed and I opted for one on a monthly contract. At the store it was touch and go whether they’d let me have one due to my rock-bottom credit score. Eventually they relented and I was given the phone I wanted, however limits on my monthly spend were imposed which came into its own when I had to ‘pay upfront’ for airtime before a necessary trip abroad one year.
Our IVA meant we weren’t allowed to sell our house or borrow against it without consultation with the insolvency agency that managed our IVA so car loans were out of the question. So when a replacement car was needed mid-term IVA, we had to pay for it with saved funds and a family loan.
Needless to say, our seven year IVA term was one of the most stressful and demanding periods in our lives.
I wouldn’t recommend an IVA to anyone as method of debt management and in all seriousness, if you’re unfortunate enough to be saddled with unmanageable debt for whatever reason, and are looking for a way out. My advice would be to explore all other options first. There’s plenty of debt management charities around that offer good advice and consultation. Make an IVA your last option, not as we did, for reasons I won’t go into here – your first! Trust me, you’ll regret it if you do.
Now that we’re out of the woods and our IVA’s have concluded: old habits remain and we still tend to buy things only when we have the cash in the bank. We have a credit card each now, but we’re still very risk averse when it comes to credit. This is why a great deal of thought went into our recent car purchase, which was largely funded by a loan, and it’s why I recently sold some of my camera gear to pay off a balance on my card. To further illustrate, to this day we don’t have an overdraft on any of our bank accounts.
Debt makes us anxious and whilst a few hundred quid is manageable, anything over that, and we start to become a bit twitchy as it plays on our minds.
So looking at my credit score today, I was shocked to see that according to the Clearscore app, it has dropped by 11 points!
It’s now at 598 which to put this into perspective, is classed as ‘Excellent’ and compares well to the national UK average of 414 so I am told. So there’s nothing to worry about of course, however things being what they were, I tend to take this depreciation personally.
So what’s the reason? Well believe it or not. I don’t have enough borrowed money against my name. As they term it my ‘credit utilisation is low’. Imagine that?
It seems, the recent clearing of my credit card balance has actually had a detrimental impact on my credit score. How crazy is that? Apparently, low credit utilisation doesn’t give lenders sufficient information about how you can handle credit and as such, their confidence in you could be undermined if it is too low.
From one extreme to the other in just a couple of years. One minute, lenders wouldn’t touch me with a bargepole and the next thing is I’m being warned that I don’t have enough debt!
Wait until that recent car loan hits my credit record, that’ll fox them. No warnings then I’ll wager!
Bastards the lot of ’em!