CREDIT

Credit = buy (or borrow) now and pay later. Credit is nearly always a service you pay for, so you pay the amount owed for the goods or loan with a fee on top. You usually pay it back in instalments over a period of time. You cannot normally take on any kind of credit before you are 18. No company will lend you money or give you goods in advance without believing they can get it back from you- for example, because you have a regular income, or you have a history of paying things on time. After all, this is their business. Credit comes in several forms -

  • Hire purchase (HP) and credit sales - you pay a deposit and then make weekly/monthly payments. With HP, the goods do not belong to you until you have made the last payment.
  • Bank loans - banks offer personal and ordinary loans, and budget accounts to spread the payment of bills over a year
  • Overdrafts - many bank accounts allow you to keep withdrawing money even when your account has nothing in it. There is always a fixed overdraft limit, and high charges if you go over this.
  • Credit cards - card companies send a monthly statement telling you what you have bought on your credit card. If you do not pay it all off within a month or so you will have to pay interest - usually quite high.

York Credit Union is a savings and loans service for anyone who lives or works in York. It is open to anyone 16+ and you can save in small amounts. It costs £1 to join - phone for an application pack or pick one up from Castlegate. You can pay money in direct from your bank account or at one of their community savings points. It’s a much better way to borrow money than through ‘loan sharks’, though they won’t make loans if they think that making the loan repayments will cause you further hardship.

BEFORE YOU TAKE ON CREDIT

  • Ask yourself whether you can really afford the repayments, and if you really need what you are buying. Credit can be very tempting, and expensive.
  • Check the 'Annual Percentage Rate' (APR) i.e. the % interest you pay over a year. An APR of 0% means there is no charge for credit - the cost price should equal the payments you make.
  • Make sure you have read the agreement fully and have understood it. Keep copies of all agreements. Never sign a blank form. If you sign the agreement in their office, or agree to it over the phone, you can't cancel it if you change your mind. If you sign in your own home you have a few days to cancel.

Failure to keep up payments

If you stop paying your HP payments, the shop can take the goods back, but they must get a court order if you have paid over one third of the total amount or if they want to take them from your home without your permission. If an HP agreement is ended in this way, you may still have to pay up to half the price of the goods. You are not allowed to sell the goods until the agreement has been paid off. Other types of credit agreement are not ended by you returning the goods - you may still owe a lot of money.

Refused credit?

If you are refused credit in a shop, it may be because you (or your address) are considered a credit risk (i.e. bad payer). Often they use details provided by a credit reference agency to make this decision. You have the right to be given the address of the agency they use; if you’re having problems it might be worth checking what information they hold about you.

Write to request a copy of your file (or apply online). There is a fee of £2. Make sure you are requesting your statutory credit file, as there may be other more expensive reports available. The three major credit reference agencies in the UK are Experian, Equifax and Callcredit.

Send your name, date of birth, current address and previous addresses in full for the last 6 years, plus payment. Places like Castlegate or CAB can sometimes get a copy for you for free. You can ask for anything on file to be corrected if it is wrong.