Borrowers use lockdown to strengthen credit rating

Thirty-one per cent of people in the UK used the lockdown period to pay down their debt, according to new analysis from Experian.
 
The proportion of Experian CreditExpert customers that had high balances across their credit accounts stood at 12.6% at the start of lockdown on 23 March, although the credit reference agency revealed this figure dropped to 8.6% at the beginning of June – just before measures to contain coronavirus had begun to ease.  
 
Data also showed that average credit balances dropped by 17% during the UK lockdown. Experian customers had an average credit balance across all credit accounts – excluding mortgages – of £9,681 in June, compared to £11,615 in March, reflecting an average fall of £1,934.
 
Experian said its findings suggest that some UK borrowers took the opportunity to use savings made by reduced spending to get their finances in order, and subsequently improve their credit score.

Lenders use credit scores, as well as other sources of information, to review an individual’s financial behaviour and help them assess people’s creditworthiness when applying for new credit.
 
“The COVID-19 pandemic has changed the way we go about our everyday life and in some cases our financial outlook and priorities,” Experian head of consumer affairs, James Jones, commented. “For some people, a reduction in spending has enabled the repayment of existing borrowing and a knock-on improvement in credit scores.
 
“As the UK slowly begins to return to some sort of normality, people should continue to practise the good financial habits they have adopted during the lockdown, especially when it can have positive impacts on your credit report and score. A healthy credit score can help secure low rates on future borrowing, so can pay handsome dividends.”

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