Understanding different forms of credit

What exactly goes into your credit report? Let’s take a closer look at the different forms of credit you might find there. Here’s the lowdown in under two minutes – from the experts at LOQBOX.

 

The better you understand your credit report, the better equipped you’ll be to spot potential problems. Here are the kinds of credit you’ll find in your report.

 

Unsecured credit
These will probably form the lion’s share of your credit data, and generally fall into two categories:

  • Fixed sum loan agreements – When you borrow a fixed amount and the repayments are worked out ahead of time. Loans to you and me.
  • Revolving credit – When you have a credit limit and the repayments and balance could change at any time. Usually a credit card.

 

Secured credit
This means a loan secured against something. Usually a mortgage (secured against your home).

 

Telecoms and utilities

  • Telecoms refers to your mobile phone contract. Because your monthly payments cover the cost of the handset over the length of your contract, this is a form of credit.
  • Utilities often get their own section in your credit report. It counts as credit because you’re paying in arrears (the service has already been provided by the time you pay for it).

 

Short-term lending
Any loan that gets paid back in (normally) six months or less. Also often in their own section.

All this data is available to any potential lender when they perform a credit check on you.

 

This post was written and compiled by the credit experts behind LOQBOX – a completely free way to build your credit history by saving a little each month. To sign up or read more about the clever way LOQBOX works, head to LOQBOX.co.uk.

This is part of our Two-minute Money blog series – unlocking the secrets of the financial system, two minutes at a time.

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