Art of business

Credit cards, personal loans, mortgages and other forms of personal credit are an everyday part of financial life for all UK consumers. Looking at the figures for UK personal debt shows that Britain appears to be addicted to borrowing money and still continues obtaining more from the financial institutions. By the end of 2005 the UK personal debt levels stood at a record £1,148, with 83% of this debt consisting of secured mortgage loans. Due to the nations reliance on credit of all forms, it is extremely important to keep a close eye on your own personal financial history and keep up to date with the official credit check reports which can help prevent fraud, and make the difference between acceptance at a favourable interest rate, or outright rejection just when the money is needed the most.

In the UK there are two main credit reference agencies which hold a wide range of financial information detailing a person’s continually evolving financial history, these are Experian ( http://www.experian.co.uk/ ) and Equifax ( http://www.equifax.co.uk/ ). By obtaining a copy of your report from each of these sources, (as they may contain different information), you can not only check the accuracy of the information stored and look for any potentially fraudulent entries, but you can also request that any incorrect information is amended to prevent possible future credit problems.

Each lender will weigh the information contained in a person’s credit file differently. However there are universal contributing factors which include:

- Electoral Roll information for a person’s currently registered address.

- Defaults on any financial repayment contracts, such as loans, mortgages, etc.

- Employment history for mortgage, credit cards, loans, hire purchase and finance agreements.

- Any County Court Judgments.

- The complete amount owed and the number of credit facilities used.

- The number of new credit facilities that have been applied for (both successful and unsuccessful applications).

- The type of credit used.

- Salary details given on the application form.

Lending organisations combine the data obtained through a credit report, along with information acquired from an application form, to produce a credit score. This score represents a measure of an applicant’s likelihood to repay debts and to make any repayments on time.

If an applicant’s score falls below the lenders acceptable risk threshold, or they don’t fit an ideal customer profile, then the application may be completely rejected. It is also possible that a low score may result in acceptance, but at a more expensive interest rate than might usually be offered.

Some credit card providers, such as the Asda supermarket chain’s finance services, now provide applicants with a copy of their credit reports with all applications, however, to obtain the best deal it is vitally important that borrowers do some shopping around. When shopping around for credit however, try to obtain as much information as possible prior to making a formal application for credit. Whenever any application for credit is made, a footprint is left on the credit record showing that a search has been made. Credit companies see lots of footprints as an indicator that the applicant may be in severe financial difficulties or even that some form of fraud may be evident. Using one of the various online financial comparison websites, such as Moneynet.co.uk ( http://www.moneynet.co.uk/loans/index.shtml ), enables you to see what is on offer, and what general market rates are available, before any fina!

ncial commitment or full credit search is required.

Even people who are not looking to obtain additional credit may find a credit report useful for peace of mind, and to ensure that their credit details are not being used for fraudulent applications, or as part of the growing disturbing phenomenon that is identity theft.

Consumer Borrowing

Consumer borrowing in the UK has now crashed through the £1 trillion barrier. 80% of this is due to credit card borrowing, loans and mortgages. How are people managing to handle their debt and what effect is debt having on families today?

The National Consumer Council reports that 6 million families in the UK are already struggling to make repayments towards their debt, and Citizens Advice reports that over the last 6 years, they have seen a 44% increase in the number of people seeking debt advice. This may be just the tip of the iceberg. There must be many families in the UK who have debt problems, but are not aware of the free help and advice available.

Tackling Debt

According to a DTI survey carried out in 2002, a household is likely to be over-indebted if:

25% of your annual income is spent on repaying Creditors

50% of your annual income is spent on repaying credit and mortgages

You have 4 or more companies that you owe money to.

People find it difficult to make repayments for a number of reasons. Generally, the underlying cause is some kind of change in personal circumstances such as job loss, divorce, illness or a new baby. In these instances some people may resort to more borrowing in order to pay creditors or household bills. This is not always the best option.

Effects of Over-Indebtedness

The personal effect of struggling to repay debt can be far reaching. Sometimes a lack of financial awareness can lead to stress, depression, anxiety, mental health problems, relationship breakdown and even suicide.

Raising Financial Awareness

The Government recognise the need to raise financial awareness amongst the general public. The financial cost of debt is not only on an individual level, but there is also a cost to society in general.

People who experience stress due to their situation, will probably seek advice from their GP and may take time off work, therefore, this has an effect on already hard-pressed NHS and productivity due to absenteeism.

People who have had homes repossessed need to be re-housed, generally by the local Council. Those who seek legal aid due to debt issues also incur a cost to the taxpayer.

The Solution before the Problem

Will raising financial awareness alone tackle the issues of debt problems? It helps for people who are already struggling with debt, but are there other areas the Government should be looking at?

If you pay your creditors on time, regardless of what it takes to pay them, you are classed as a good payer and therefore, not a risk when it comes to additional borrowing. In fact, your finances could be in turmoil and you could be taking money from one card to pay another but you may still obtain even more credit.

The freedom creditors have to advertise loans, credit cards and mortgages could be challenged as well as how decisions are made regarding lending.

If people, who are currently in financial difficulty, find they cannot borrow more money, they should be made aware of the free financial advice that is available. Free Debt Management Companies such as Payplan can negotiate repayments with creditors so that monthly payments are reduced and become more manageable.

What is the term to “be rich”? For any American, “being rich” has been something to achieve in this capitalistic society. Ever since the Great Depression years, big business conglomerates have reluctantly given way to the entrepeneur; the creative, inventive and proactive businessman willing to sacrifice all to be his own boss. Back then, the Ma and Pa storefronts had no chance competing against humongous strip malls financied by J.D. Rockefeller of J.P. Morgan. Nowadays as Ma and Pa “separated”, each one has built their own strip malls thanks to government breaking up monopolies and trusts. Capitalism has joined free enterprise. Together, they formed a successful union. Out of this joint partnership, we have “self-made” millionaires and billionaires, like Oprah Winfrey, Bill Gates, Paul Allen, Black Entertainment Television(BET)founder, Robert Johnson and Def Jam Records founder/owner Russell Simmons.

For two years, America endured a crippling recession. The Iraq war compounded economic woes. Every time an oil pipeline blew up, our dollar weakened. NYSE (New York Stock Exchange) dropped a few points when a suicide bomber attacked a school, an Iraqi police training facility or a downtown market. A generation before, we held sway over our money miseries.

Nowadays, Fallujah, Abu Garib and the Sunni Triangle dictated our spending. The five year wasn’t the only issue. President Bush allowed big companies to ship American jobs to India, Japan, Mexico and maybe, China. We still had free trade and NAFTA lurking around and embezzling much needed dollars. During Bush’s eight years, our country operated with a plus $1 trillion dollar debt. But, the federal government insisted on lending money to embattled Iraq. All of the destruction and political chaos emerged from our military conducting a sloppy, campaign for Operation Iraqi Freedom. The recession made our esteemed “middle-class” virtually extinct. There are only two separate, and distinct classes: the very rich and the very poor. Both entities are unwilling to merge and assist one another.

When an economy is working together, you have an affluent society for everyone. When an economy is in turmoil, there are separate classes and separate societies. For Big Business to prosper, there has to be discord. War remained the biggest business to be made. War coincided with patriotism. Patriotism and nationalism are similar behavior shared by a misguided populace. One step away from both is called fascism. In World War II, we had fascism in its most pure and most brutal form.

Our economy won’t be recovering as long as American troops are in Iraq. Occupying their country never strengthened our U.S. dollar. We were once able to muscle other countries with our money. That money betrayed us into a costly war.