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As Christmas fast approaches and levels of consumer spending increase, financial pressures also increase for many, some of whom are already struggling. I therefore thought it would be a timely moment to discuss the importance of understanding personal finances, and becoming ‘financially fit’ for the festive season, rather than waiting until the New Year, when it is often too late.

Here at Registry Trust, we manage the Register of Judgments, Orders and Fines, which gives us an accurate measurement of levels of indebtedness in the UK. With the number of debt cases increasing in recent years, and the impact of Covid-19 predicted to disastrously affect the UK economy, it is more important than ever to address our personal finances. Furthermore, the positive relationship between financial instability and poor general health, which I see in my analysis of monetary judgment data, shows that becoming financially fit is about more than just money.

Types of debt can vary greatly, from credit card loans to missed bill payments or car parking fines. The causes of going into debt often centre around a lack of financial education and capability. For example, understanding the right loan for you, how to manage money and budgeting, are all good preventative measures that can leave those without the knowledge in debt. This was brought to light during Talk Money Week when Money and Pensions Service highlighted that 77% of UK residents believe they received no financial education while at school. It may be accurate to assume that a similar percentage of adults have still received a very limited amount, if any at all.

We work closely with the credit referencing industry to provide accurate information about those have previously been unable to pay a debt and find that people being unaware of the importance of monitoring and working on their credit score can be a big issue when it comes to financial fitness. According to Credit Connect, since the start of the pandemic there has been an upsurge of interest in financial education, but 60% remain unaware of their current credit score. Credit reference agency Experian found that three in ten never look at their credit score, and 25% are not aware of what contributes to it. Knowing your credit score is vital, as it is the means by which lenders determine whether, and the total value of credit that can be granted. Being aware of the contributing factors of a credit score mean that measures can be taken to ensure it remains healthy, and continued borrowing of money is permitted. An inability to access affordable credit can have further financially damaging effects, such as being unable to obtain a mortgage, which may result in an inability to get on the property ladder and be tied into costly renting.

Another example of poor financial capability we often see is lack of awareness around ‘satisfying’ CCJ debts. If a person is unable to pay a debt, a judgment (CCJ) is placed against them. However, once the judgment is payed, the record is not removed instantly from the Register until it is formally ‘satisfied’. Without satisfying the judgment it will remain on the register, thus showing evidence to landlords, mobile phone contractors, mortgage lenders and other creditors, of a previous inability to repay owed money. This is likely to influence their decisions on credit applications.

All of these can dramatically increase financial vulnerability and lead to bigger problems. There is lots of useful information out there from organisations like StepChange Debt Charity, the Money and Pensions Service, Citizens Advice and others. When it comes to CCJs and credit scores, our public-facing website www.trustonline.org.uk allows you to check a person, business or case number on our register to see if you or someone else has an outstanding CCJ debt listed. The website also has a bank of ‘Help Topics’ with answers to common questions.

If you want to become financially fit for 2021, now is the time to start and understanding your credit file/score is a good starting point.

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