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Why credit scores are like grades

The simplest way to understand your credit score is to think back to your school days.

Think back to a time when your performance was measured in letter grades. Basically, having a great credit score is equivalent to being an A student.

Or, for people at the other end of the spectrum, having a low credit score is much like being a C or D student. If you just think about your credit score in terms of the letter grade system, the comparisons are easy.

And, the reality is that your parents or teachers were somewhat right — your grades can determine your future, like the fact that high school grades were a large factor in where you could go to college. Well, just like that, your credit score influences the types of loans you can get, as well as the types of interest rates you’ll pay.

But it’s important to understand that your credit score (unlike your grades) does not necessarily “go down in your permanent record.” Nope, the credit scoring system is much more forgiving! Your credit score is always changing, and you definitely have control over how it will be in the future.

You can’t go back and retake Calculus junior year, can you? But let’s say your credit score is not exactly perfect — a few late payments on cards, or loans — it doesn’t mean lenders will blacklist you for life. If you get your financial house in order, which is often as simple as starting to make regular on-time payments on your credit cards and loans, then over time your score may rebound. While your school transcript will always show that C+ in AP History, your credit score only shows your current creditworthiness. It lets lenders evaluate how much of a risk you are, as well the type of interest rates you’ll get, whether for credit cards, a car loan, a personal loan or mortgage.

The system is cyclical: lenders report your payment history to the credit rating agencies (the three major agencies are Equifax, Experian, and TransUnion), and they act as a kind of hub, a place where your payment performance is centralized and can be accessed by lenders. This “hub” helps creditors make decisions much faster. Today, with our online capabilities, lenders can approve or deny applications almost instantly. In addition, your credit score is free of biases. It isn’t influenced by factors such as race, religion, marital status, or gender. And it’s a great system in that your credit score doesn’t scar. It isn’t permanent. It changes with you and your habits over a lifetime. You know how sometimes you look back at school and think “if only I knew then what I know now?” Well, with your credit score, you can always learn to do it better!

Take the next step: protect your credit and start saving money.

Source: True Credit

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More than half of SMEs unable to fund business ambitions

More than half (52%) of UK SME owners have business ambitions they feel they are unable to fund, alternative finance provider Nucleus Commercial Finance has revealed.

Business owners in the capital are struggling the most to match their ambitions, with over three-fifths (61%) of London SMEs unable to access funds.

Chirag Shah, chief executive, Nucleus Commercial Finance comments: “Although it’s great to see an increase in both profit and revenue for small businesses, it’s clear that funding challenges still remain.

“If business owners cannot access the funds they need to achieve their strategic goals, we could see a significant impact on the UK’s economy if SMEs are held back.

“With SMEs accounting for 99% of all UK businesses, the alternative finance industry has a significant role to play in helping businesses succeed.

“Particularly as high street banks become more reluctant to lend, we need to better educate small businesses on the other solutions out there.

“The alternative finance industry offers a more flexible and personalised approach to lending, meaning they can help business owners who otherwise thought they had no available option.”

Despite SME owners reporting that revenue and profit increased by 10% and 8% over the previous year respectively, businesses are reportedly struggling to achieve their strategic goals.

The biggest goals are increasing brand, marketing or online presence (19%), expanding across the UK (17%), increasing staff (14%) and launching a new product or service (13%).

By Michael Lloyd

Source: Mortgage Introducer

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Steepest fall in lending to UK businesses for almost two years

LENDING to UK businesses saw the biggest decline in almost two years in July, the Bank of England has reported.

Net lending to UK firms slid by £4.2 billion over the month, driven by a £2 billion net repayment by businesses to banks.

The significant amount of repayment saw the annual growth rate of bank lending to UK businesses fall to 3 per cent, down from 4.4 per cent in June.

Analysts have suggested the slump in borrowing could be another sign that firms are resisting investment which would need a loan and are hunkering down until there is greater clarity over Brexit.

The decline was most significant among large businesses, where the growth rate of borrowing fell to 4.2 per cent.

Growth of borrowing by small and medium-sized firms (SMEs) was unchanged at 0.8 per cent for the month.

Michael Biemann, chief executive of Selina Finance, said: “SME borrowing rates remained static at 0.8 per cent, which once again underlines the disconnect between the average UK business and the high street.

“These days, high street banks want businesses to jump through all kinds of hoops to secure finance, and so it’s no surprise the number of SMEs turning to alternative sources is on the increase.”

Meanwhile, the new Bank of England figures also revealed that British lenders approved the greatest number of mortgages for two years in July, appearing to highlight greater stability in the housing market following a Brexit slowdown.

The central bank said lenders approved 67,306 mortgages last month, up from 66,506 in June.

The UK housing market has been downbeat since the EU referendum in 2016 but has shown tentative improvements in recent months.

However, earlier on Friday, the latest Nationwide housing survey revealed that annual house price growth ran below 1 per cent for the ninth month in a row in August as consumer confidence remained low.

Source: Irish News