Let’s talk about borrowing
Wondering about how borrowing and credit actually work? You’ve come to the right place.
Credit myths
Not everything you hear about credit and borrowing is true. Don’t let these myths stop you going after your goals.
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Not true. When you use credit well, it can work in your favour. Making your payments on time shows lenders you’re reliable and that can improve your credit score.
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Not quite right. It’s not the card, it’s how you use it. Set up a direct debit so you make payments on time and use under 50% of your full limit. That can actually improve your score and show you aren’t reliant on credit.
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Wrong. You’re safe to check your score. Soft checks don’t affect your score at all. Only hard checks, like when you’re applying for credit, make a difference. And even then, only for a short time.
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No. It’s not ideal but get back on track and your score will recover over time. It’s better to get in touch with us if you’re ever concerned about making a payment, as we can help with support or advice.
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Unfortunately not. Unlike a well-managed credit card, BNPL services don’t currently help you with your credit score, even when used correctly. But not managing it well, like late or missing payments, can lower your score.
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Not necessarily. Arranged overdrafts can be very useful as short-term borrowing but can cost more than other credit options. Going beyond your overdraft or having payments refused can also hurt your credit score and you may face extra charges.
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Not at all. You may have fewer options, but being on the electoral register and having bills in your name is a great start. Then maybe consider a credit-builder card or small loan, with a balance you can afford to repay, to help you build up a payment history.
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Not right. Paying in full each month can help you avoid paying interest and paying on time shows you’re reliable to lenders and helps build your credit score.
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Definitely not. A decline doesn't mean you're permanently rejected. Different lenders have different criteria and improving your finances over time can increase your chances of being accepted in future.
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Not always. Lenders look at affordability, not just income. Big commitments such as rent, childcare or existing debts can affect how much you can borrow.
Understanding credit scores
Credit scores
Your credit score is a bit like your financial reputation with lenders.
A good score usually makes it easier to get approved for credit and can mean you get better rates too.
Your score is built from information like:
- making payments on time, or any missed payments
- how much of your credit limit you use
- how long you’ve had accounts open
- applying for and opening credit-based accounts
- being on the electoral register and having bills in your name.
You don’t have just one score. There are 3 main credit reference agencies that collect and store similar information but work out your score differently.
Check your credit score
Credit can help you make things possible by spreading the cost. But it’s good to know how much you can afford, and what borrowing is right for you, before applying for any credit products.
Explore your borrowing options
Borrowing is a big decision and we’re here to help.
Use our tools below to help you work out what type of credit might be right for you.
Need a new car?
We can help you work out your options.
Learn more about credit cards
Watch our bite-sized videos to find out more.
