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Are household bills still increasing? How do you manage this?

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Households have been hit hard as the cost of bills and other goods continue to rise. The cost of household bills have risen twice as fast as salaries over the last decade, according to a study. So what are the main culprits?

Gas and electricity are the biggest drivers of the increase – rising 73% and 72% respectively over the past 10 years, while water bills have increased by 41% – all significantly higher than inflation at 32%. Basic household bills have increased by an average of 43% overall, more than double the rate of wage growth, the figures suggest.

Council tax has risen by 27%, and TV, phone and broadband prices have all gone up by 24%, albeit slower than inflation but still faster than wage growth of 19%.

Some 13% of the average UK adult’s salary is spent paying basic domestic bills, so what can we do about it? Here are some useful tips.

  • You could reduce the amount you pay by switching gas / electricity supplier, changing to pay by monthly direct debit or looking at the different tariffs your current supplier offers.
  • Installing a smart meter can help you to see the energy that you are using and help you to cut down.
  • Switching to a water meter can help save money if you are in a household that doesn’t use much water as you only pay for what you use.
  • Shop around for your mobile phone tariff and make sure you are only getting what you need.

There are some bills that you can’t find better deals for such as your tv licence and council tax. Unfortunately the only way to pay less council tax is by moving to a property in a lower council tax band, but that might be a bit drastic! You can, however, pay for these in monthly instalments to make these bills more manageable.

Make sure you shop around for things like home insurance, tv, broadband and telephone. Using a comparison website to search for these and your other household bills can give you the  better deals, meaning you could save a small fortune.

Depending on your age and/or circumstances it could mean you are entitled to a reduction or help with certain household bills, so it is worth checking if you are entitled to anything. The best place to start is https://www.gov.uk/

 

How to improve your credit score

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Struggling to borrow money? Constantly being turned down for credit? You need to check your credit score.

Just like reading your credit card bill or checking your bank statement, your credit report is something that’s worth looking at regularly. This way you can keep an eye out for fraud, maintain your credit score, and put yourself in the best position to get the cheapest rates, should you should need to get credit at any time. You can check your score for free and if it isn’t in the best shape, there are things you can do to improve it.

What is a credit score?

Your credit score is created from information held in your credit report. The information held on your credit report and your credit application form might be used to decide:

  • whether to lend to you
  • how much to let you borrow
  • how much interest to charge you

The most recent information on your file will have the most impact, as lenders will be most interested in your current financial situation. That said, your financial decisions, good or bad, from the last six years will still be on record.

How do I check my credit score?

There are three main credit scoring agencies in the UK: Equifax, Experian, Callcredit.
You can request full details of your credit file for £2 or simply get your score for free. The main difference between the £2 and free versions are that the £2 versions let you have a paper version sent to your address, while the free versions are online.

Check your credit score

How can I improve my credit rating and credit score?

If you have a low credit rating, there are several things you can do to start improving your score today:

  • Register on the electoral roll: if your name’s not on there, you’ll find it much harder to get credit.
  • Check for mistakes on your file: even having just a slightly wrong address can have an impact on your score.
  • Pay your bills on time: taking out smaller forms of credit like a mobile phone contract or store card could be easier to get accepted for. If you manage them well, they should show that you can pay bills responsibly and on time each month.
  • Consider closing unused credit accounts if you no longer require them. It could be better to have fewer, well-managed accounts, and long-standing accounts with good histories.
  • Applying for lots of credit can suggest you are over reliant on credit to supplement your income. If you can, aim for no more than one application for credit in a three month period.
  • Your ‘available credit’ is the difference between your outstanding balance and your credit limit. If you have low available credit, banks and financial institutions may think you’re struggling to manage your finances.
  • Check if you’re linked to another person: having a spouse, friend or family member’s credit rating linked to yours through a joint account could affect your personal rating if they have a poor score.
  • Check for fraudulent activity: if something on your credit report is incorrect or doesn’t apply to you, i.e. if someone applied for credit in your name without your knowledge, contact the credit reference agency immediately to have your file updated.
  • County Court Judgements (CCJs): receiving any court judgements for debt will have a serious impact on your credit score. If you’re having problems keeping up with payments, find free debt advice online.
  • High levels of existing debt: ideally you should eliminate any outstanding debt before applying for new credit.
  • Moving home a lot: lenders feel more comfortable if they see evidence that you have lived at one address for a considerable period.
  • If you have a credit history from a previous country, some lenders may be willing to take this into account when deciding whether to do business with you. You’ll need to get it from the credit reference agency in that country, and share it with the lender, but it could be a big help.
  • If you’re struggling to improve your score, don’t struggle alone. Sign up with one of the main credit agencies for a free trial.

 

Credit cards – a risky business?

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Credit cards can provide great perks and allow you to earn cash back or rewards for your purchases. They also serve as tools for helping you build credit, which can be important if you want to buy a house or car one day. But there are some risks involved in using credit cards, and if you’re opening a credit card for the first time, you may be nervous.

However, if you’re aware of the dangers of credit cards, you can avoid making these mistakes while using credit cards wisely and taking advantage of their perks, benefits and rewards.

If you have the wrong attitude about credit cards, it could be easy to borrow more than you can afford to pay back. A credit limit should be thought of as a loan extended to you by a credit card provider as opposed to free money to spend. Credit card balances generally come with interest rates. Every time you add to your balance and don’t pay it off in full within the billing cycle, you’ll have to pay that much more in interest. This can make it difficult to get out of credit card debt.

If your card’s credit limit is £2,000, this doesn’t mean you should plan on spending £2,000 that month unless you know you can pay off your bill in full right away.Be mindful of your spending, and make sure you’re not buying more than you can afford. Consider creating a monthly budget and figuring out how much you can afford to spend each month — and then try not to exceed this.

Missing your monthly payments

Your payment history is one of the biggest factors that contribute to your credit score, so missing payments can have a serious impact on your credit. Also, if you miss a payment, you’ll typically be charged a late fee. A penalty APR may be applied to your account as well.

One way to potentially avoid this is by setting up direct debit payments. With direct debits, you won’t have to worry about forgetting to pay your bill, but you will be responsible for ensuring there’s enough in your account when the direct debit is due.

The best way to avoid having to pay interest? Try to pay your credit card statement balance in full and on time every month.

Applying for too many new credit cards at once

You may want to avoid applying excessively for credit cards or for cards you don’t actually need. That said, you shouldn’t generally let this worry you if there’s a specific credit card you’re looking to get.

You may also want to avoid cards you’re unlikely to be approved for, because you’ll have added a hard inquiry to your credit reports without any reward.

Using too much of your credit limit

Your credit scores can be negatively affected if you have a high credit card utilisation ratio. Credit card utilisation ratio refers to how much of your available credit limit you’re using.

A good rule of thumb is to keep your credit utilisation under 30 percent. If your credit utilisation ratio is currently higher than you’d like, consider asking your credit card provider for a credit limit increase (which is at your provider’s discretion and may involve them making a hard inquiry if they check your credit). Or if at all possible, try to limit your spending by budgeting. If you’re carrying credit card debt, paying it off will also reduce your credit utilisation ratio.

It is worth noting the rapid growth in personal borrowing on credit cards, loans and car finance, is now rising at almost five times the rate of growth in UK pay. Households are finding themselves increasingly squeezed by meagre earnings growth and rising inflation, as the weak pound after the Brexit vote pushes up the cost of imported goods.

Bottom line

Though there are dangers associated with using credit cards, you can minimise their impact by following some basic principles. As with using any form of credit, it’s best to avoid complacency and maintain a sense of discipline — you might find a little can go a long way for your credit scores.

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