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Does Universal Credit affect credit scores?

Does Universal Credit affect credit scores? This is the question on millions of minds as the global pandemic has changed jobs, lives and finances. This in return has resulted in a record number of applications for some form of government support – known as Universal Credit – in the UK.

Universal credit is the weird and wonderful benefit system of the UK. Until recently, it was assisting around 2 million people. This figure rocketed in 2020 with the outbreak of the COVID-19 pandemic. Suddenly, families who had seen themselves as financially secure and stable could face uncertainty. The UK Government actively encouraged us all to apply for Universal Credit, where appropriate, as a means of support. People who had previously had no experience of the benefits system had to learn how the system worked and learn fast.  Beyond their lives shaken up, many wondered if universal credit affects credit scores too.

Now, after that somewhat depressing opening full of doom, gloom, and despondency, let’s try and throw a little positivity into the mix.

Does universal credit affect credit scores
Can universal credit impact our credit score?

What even is Universal Credit?

You’ve clicked here because you’re asking yourself, “Does Universal Credit affect my credit score?”, and we will get there, eventually. First, it’s worth a quick look at what Universal Credit actually is.

Prior to 2013, we were all confused. If we found ourselves in a position where we needed any form of financial support, we had to fill in an application. Once we’d done that, we had to fill in another application, and then another, and then another, and then…….. well I’m sure you get the idea. The Government then, quite unusually, had the idea of simplifying the process. There was then just one application and just one payment made each month. This payment was a combination of the benefits that had previously been available, separately:

  • Child Tax Credit
  • Working Tax Credit
  • Housing Benefit
  • Income Support
  • Income-based Job Seekers Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)

Will lenders know I am receiving Universal Credit?

We have already looked at how your credit score is calculated, and from this, you’ll know that your source of income doesn’t show up on your credit report. So, looking at your credit report itself will not reveal that you are in receipt of Universal Credit. However, and there always seems to be a ‘however’, lenders will ask to see proof of income before deciding if they are willing to approve a loan application. This would mean that they would likely see that you are receiving Universal Credit.

Does universal credit affect credit scores?

The short answer is no, however, (here we go again) when applying for any type of loan or financial product, a decision is not reached based solely on your credit score. Lenders all have their own criteria that they will use to assess your application. Providing that you have a good credit history, including a good credit score, and have shown your ability to maintain your finances and pay back what you owe, Universal Credit should not have an impact on you being accepted for a loan.

While the world remains uncertain, Wollit can provide some comfort. If you are self-employed, a freelancer, or on a zero-hours contract, we can provide you with a regular income, meaning that you can manage your expenses and protect your credit score, including when you are receiving Universal Credit

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