Credit scores and writing a list of your jobs on instagram.
Welcome to All Consuming, my monthly top tips on how to break off a bit of the consumerist crust and eat it for breakfast.
This month we start to delve into the complex world of credit and the mechanics of credit ratings. As a Working Class person I do not advocate for playing around with credit but I know it is sometimes completely necessary. Credit like most things is a poor person's problem, it is only an issue when you cannot pay it back - which for many of us is a regular occurrence. Credit can allow us to make ends meet and put food on the table when there is no other means to put it there. It makes it possible to buy a loved one a Christmas gift or to help us out of an emergency when we feel completely alone. The price for this security is brutal interest rates and savage late payment charges.
I recently had a long conversation with someone that asked why some people take less risks than others. This conversation was regarding an art practice but it can be applied outwards. My theory is that Working Class people take less risks because they cannot afford for them to fail, this could be the direct failure of the matter in hand or the consequences of that failure. For example during my BA I had some middle class friends that went to Europe for the summer, to visit various art scenes and just meet people, network. They had no plans, they were just going to turn up and work it out, surely someone would give them somewhere to stay or they could hitchhike. it won’t cost much they said - we will do it on the cheap. They said it was going to be great for our careers, a development process. I didn’t go, not only because I couldn’t afford to get there but if anything went wrong I didn’t have enough money to be safe, to get home or to book a hotel last minute and I didn’t have anyone to ask who would negate that risk on my behalf. I also didn’t have a credit card to negate any of that risk, which would have provided me with the same buffer.
Credit gives you a risk management service, but is itself an expensive risk. One which you have to operate within if you stand any chance of getting more credit, this includes being considered for a mortgage. This is where we get into the murky world of the Credit Rating.
A Credit Rating also known as a Credit Score, is an evaluation of the credit risk you pose to a prospective debtor, this is used to predict a debtor's ability to pay back the debt, and is an implicit forecast of the likelihood of that debtor defaulting (says Wikipedia). It is a 3 digit number which as allocated to you as soon as you apply for your first credit which to be clear is not just credit cards it can include utility bills, car insurance, store cards and phone contracts - anything that requires you a company to essentially ‘lend’ you a service that you pay for retrospectively.
There are a few things people don’t know about Credit Ratings - or I didn’t until my complicated lived experience.
- You need to have it to get a mortgage.
- Your Credit Rating currently works in a 7 year cycle - in that it only is logged up to 7 years ago.
- You must be consistent, it logs EVERYTHING - moved banks and pay your phone bill a week late? They log it.
- Just because you have never had any credit experience before does not automatically mean you will be accepted for credit, your credit score will be 0, which is actually unattractive to lenders as they have no example of how you handle credit especially if you are older.
Next month we will start going into accessing credit, but I just want to be really clear, if you are struggling in this current climate as so many of us are, Credit is rarely the answer, I have learnt this the most brutal of ways (more on that next month too). Your first port of call is always your local food bank and Citizens Advice (especially if you are dealing with debt, cost of living etc) - both services are helpful, confidential and kind.
https://www.citizensadvice.org.uk/
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As usual each month I also write an additional text on something which has come up for me recently……..
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