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How do you rate your finances? According to research by AA Financial Services, many people are embarrassed by their money management skills, but that could lead to disappointment if you're planning to apply for credit in the future…
The figures show that 39% of those surveyed would be embarrassed to show anyone their bank statements, and that 22% think they'd fail in their application for a loan, credit card or mortgage if they didn't improve their spending habits in advance. Millenialls (those aged 18-34) are most embarrassed by their bank statements (62%), and would be particularly anxious if their parents saw them (28%).
Perhaps unsurprisingly, this leads many to embark on a credit detox before applying for a product, with 60% saying that they'd work to improve their finances beforehand to boost their chances of acceptance – and once again, millennials are the most likely to go on a financial health kick (78%).
On average, most will start trying to clean up their finances around six months in advance of applying for a product, but unfortunately, it isn't always a life changing event: as is often the case with these newfound good habits, 45% of detoxers admitted that they return to bad habits once they've been approved.
"Whatever the motivation, improving your spending habits is a good thing, but it is important to make sure you stick to it in the long term," said Michael Johnson, director of AA Financial Services. "If you are looking for a loan, credit card or mortgage, then you should be aware that your spending habits matter – lenders will always check your credit score and good habits will open up better rates, not just make approval more likely."
Giving your finances a detox can be the first vital step to improving your credit score, and as Michael points out, it's easy to see how you rate. There are plenty of credit reference agencies out there, such as Experian Credit Expert, which should be your first port of call – and you should get it sorted sooner rather than later.
"A poor score can make the difference between getting a loan or not, or paying a higher interest rate," explained Michael. "Scoring is based on how you manage your money, including the number of outstanding balances you might have on loans or credit cards, and a missed monthly credit card payment (for example) can adversely affect your score."
This is why it's so important to make sure your finances are in check, and sticking to your guns can ensure your score will be just what lenders are after.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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