LOQBOX is a new product that aims to improve your credit score as you save regular amounts of money. And there are no fees at all. Which sounds good, doesn’t it!
I’m tired of suggesting that people with poor credit scores should get a “bad credit card”, use it each month and repay it in full each month. That works work well if you can stick to the plan… but one 24 year old I was talking to said:
it’s making you walk a tightrope. The lenders like it because it shows if you are good at balancing, but if you slip up you are stuck with debt at an extortionate rate.
So an alternative that is less risky and which encourages people to save is well worth looking into.
How does LOQBOX work?
Setting up a LOQBOX
You sign up with LOQBOX . There is no credit checking at all. You won’t be rejected even if you are bankrupt or have just finished an IVA.
You decide how much you can afford to save every month for a year. This needs to be savings that you won’t touch until the end of the year. You can choose any amount between £20 and £500 – I’ll use £40 as an example for this article.
If you aren’t sure how much to save each month, go for a figure you are very confident you can manage every month for a year.
You are then set up with your own LOQBOX worth 12 times your monthly payment. Think of it as buying a box with £480 in it… but you have paid for this box by taking an interest-free loan of £480 for a year.
If all goes well
Your monthly payments to LOQBOX are taken by direct debit from your bank account. The payment date can be any date you choose. It’s a good idea to make this on your payday or soon after – that means you never see the money sitting round in your bank account tempting you to spend it!
Each monthly payment is used to pay the next installment of the loan:
- after 1 month you have paid in £40, your savings. At the same time £40 of the money in your LOQBOX is used to repay the first month of your loan, so there is only £440 left in the LOQBOX;
- by the end of the year, you have saved £480 and the 12 loan repayments have cleared your loan, leaving nothing in the LOQBOX.
These monthly loan repayments are reported to Experian, Equifax and TransUnion (the new name for Call Credit), so they will show up on your credit records. Making these loan repayments on time is going to look good on your credit record and improve your credit score.
How to get your savings back
After your last payment, LOQBOX will suggest some new accounts to you to choose from, including current accounts, ISA (tax-free) accounts and other savings accounts. LOQBOX gets paid a referral fee when you open one of these – this is how they make their money and can offer their service to you for free.
If you open one of these suggested accounts, your money is transferred into there. It would be a great idea if you can then continue your savings habit, but they are all “easy access” accounts so you can take your money out straight away if you want.
If you don’t want one of these accounts, LOQBOX can transfer the funds back to your current account minus £30 for using what they call ‘Flexi Unlock’ – this charge is a substitute for the referral fee that they would have earned if you had opened one of the new accounts that they offer.
If you can’t open an account because you are rejected, then LOQBOX won’t charge you this £30 and your savings are returned to your bank account in full.
And if things don’t go well
If after a few months you realise you can’t afford your next payment, or if you just want to get the money you have saved back, tell LOQBOX.
Say you have made the first 5 months payments of £40 so you have saved £200. Your loan is now down to 480 – 200 = £280 and your LOQBOX still has £280 in it. So the LOQBOX £280 will be used to repay the rest of loan and you can get your savings – the £200 – back.
You haven’t defaulted on the loan so this won’t harm your credit record. But the loans will have done your credit score less good than if you had carried on to the end. Taking on any new credit harms your credit score for the first couple of months, so if you stop saving very quickly you may not have benefited at all.
It only goes badly if you ignore it
The only way LOQBOX can harm your credit record is if your direct debit is rejected. If you tell LOQBOX before this happens and ask them to return your savings, you won’t have a problem.
Can I trust a firm I have never heard of?
LOQBOX is an Appointed Representative of Credit Improver Limited, which is authorised and regulated by the Financial Conduct Authority. Your monthly savings are held in a ring-fenced, client account with Lloyds Bank. If LOQBOX goes bust, your savings in this account cannot be used to pay any LOQBOX debts.
How much will your credit score improve?
This is a hard question to answer as it depends on the rest of your credit record. But for monthly payments of £40, the effect on your credit score should be the same as if you had taken out a loan for £480 and repaid it over a year.
Who should look at LOQBOX?
I think LOQBOX is well worth trying if you have some money you can save every month and you have a “thin” credit record will little on it.
It has three major advantages:
- it is much less risky than a bad credit card;
- if things go wrong for you, you can still stop your credit record being harmed; and
- you will end up with a small (or large!) savings pot.
It is best for:
- people with little or nothing on their credit record eg young people and people who have just come to the UK.
- people who have been insolvent (bankrupt, in an IVA or a DRO). After this has ended, no-one will give you credit at a good rate.
- people who had defaults which have disappeared after 6 years, leaving a “clean” but “empty” credit record.
It isn’t right if:
- your credit record is littered with problems. Here LOQBOX will make very little difference until all your problems go;
- you have a lot of credit card or other expensive debt. It’s better for future credit applications to repay/reduce this debt;
- you are struggling to pay your debts. Here you can’t afford the monthly saving – missing payments, getting defaults and possibly CCJs would be massively worse for your credit score than any improvement from LOQBOX;
- you want to save up an emergency fund you may well need during the year. That money needs to be in an easy-access account – try a credit union or look at Plum – an app that helps you to save.
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Hollie says
This is genius! I’ve never heard of Loqbox but this sounds like a really great scheme for someone who needs a supportive structure to build their credit score. I know a few people who would benefit from this kind of method so will pass on the link. Thank you.
Sara (Debt Camel) says
I would love to hear how they get on with it!
Marco Bratt says
Is the case the more you pay monthly the higher your credit score goes up? 500 a month sky high? Also can you change the amount to put away each month?
Sara (Debt Camel) says
No. The more you pay, the larger loan you are taking out. This doesn’t change your credit score – that isn’t affected by the size of debts. However some lenders may be more impressed if you are repaying a £600 loan at £500 a month compared to a £240 loan at £20 a month. But other lenders may not care about the size.
Saving a very large amount doesn’t seem sensible, as you won’t be getting any interest on this money. I also think it’s important to be VERY sure you can get to the end of the year, so err on the lower side?
Lena says
I wonder if LOQBOX will work for me. I have very little credit history and I wnant to apply for a mortgage in about 6-8 months. If I set up a “loan” with them for £1200 and pay £100 every month, and then 6 months from now I decide to apply for a mortgage, can I just repay the balance (£600) before I apply for the mortgage? Or does it have to be paid with the same amount every month for 12 months?
Sara (Debt Camel) says
I think that is a bit marginal. Taking out credit actually harms your credit score for the first few months, and it’s also good to go into a mortgage application with no complications on your recent bank statements. But why not talk to LOQBOX about this? they may have a more definite answer.
Rosie says
Is there any indication out there by how many points your rating grows per month? I know that’s linked to how much you save so say per £100?
Sara (Debt Camel) says
Not really because it will all depend on what else is on your credit record already.
But it isn’t linked to how much you save! So there is no point in trying to stretch to save £100 when £50 would be easier to afford every single month. It’s making all the repayments on time that affects your credit score.
Some lenders may be interested if you have been affording more – a mortgage lender is going to be more impressed by £100 than £20 a month obviously. But most will just want to see that you have been doing what you said you would every month as that shows reliability.
Claire says
Im on a IVA and its new i still have 4years and 8 months left to go, can i still do this, or wait til the IVA is finished, as the whole reason i want on this is to sort my debts and repair my credit file.
Sara (Debt Camel) says
There is no point at all in doing this so early in an IVA, it will not make any difference to your credit record in 5 years time. Wait until the last year!
BUT if you can save up some money, even just £20 or £30 a month, it’s a good idea in case your IVA becomes more difficult over the next few years. Getting safely through to the end of the IVA is your main concern now, not your later credit record.
Cee says
Which is better to go into to rebuild a credit rating after a DMP, Loqbox or ‘bad credit cards’ or both.
Sara (Debt Camel) says
CAn you afford regular savings? If you can, then LOQBOX is a risk-free way of rebuilding your credit record. There is no danger of you putting more on a card than you can repay and so getting trapped back into debt.
Long term it is good for your credit rating to have a credit card. But by improving your credit rating first with LOQBOX you may be able to get a mainstream Ok credit card and avoid the very expensive ones.
Danish says
My Review
The signup process is very straight-forward. However, It will be great to have an app.
It takes time to get an impact on credit score, if you open/cancel your LOQBOX after few months it is not going to help you. It’s much cheaper/free as compared to maintaining credit cards or other credit products.
There is £30 withdrawal fees at the end but you avoid that by referring LOQBOX to your friends.
Gary says
How much is withdrawal fees if you end it before 12 months are up? 🤦
Sara (Debt Camel) says
I think it’s the same as at the end of the 12 months – see How to get your savings back in the article above.
Matthew says
I’ve been declared bankrupt in March this year, is this only for once you’ve been discharged? And if not does it make more or less impact before or after?
Thanks, Matt.
Sara (Debt Camel) says
it’s not worth bothering with this until after you are discharged and you have gone through the basic credit record clean-up post bankruptcy, see https://debtcamel.co.uk/credit-file-after-bankruptcy/. Even then your credit record won’t get up to fair until the bankruptcy marker goes. but whent he bankruptcy marker goes after 6 years, having a LOQBOX loan showing as having been repaid helpt you score be good, not just empty.
laurence says
would like to know more
Sara (Debt Camel) says
I suggest you talk to LOQBOX about it.
Kay says
Hi,
Thanks for this post Sara.
I have a quick question.
My report shows 5 defaults (all under £1,100 except one, which is £5.5k), currently ranging from 18 months to 30 months ago… due to past problems which are behind me now.
In 12-18 months, I’m looking at getting a mortgage. By then the defaults will be older which is good.
The only active account I have is a mobile rolling contract which shows on Experian.
Because of my defaults, I’m getting rejected by bad credit credit cards. Not that I ever want to take out credit (apart from a mortgage) again. But I was thinking a bad credit credit card paid on time will look favourable to the mortgage company, because my report only shows my mobile contract and the defaults.
In your opinion, do you think the Loqbox is worth opening to improve my credit? Even if it’s to show an extra live account on my report.
I’m just trying my best to get into a situation where I put all odds in my favour when applying for a mortgage.
Thanks
Kay
Sara (Debt Camel) says
Have the defaults been repaid?
Kay says
Only two. The rest (totalling approx £8.5k) are being paid via direct debit and will be paid off fully in 3 months. I’ll be taking out a lump sum dividend from my limited company to get the whole lot paid and satisfied in full.
The aim is to have almost a full year of the defaults being satisfied.
Sara (Debt Camel) says
OK, it’s best if you make that a full year before a mortgage application. That is a metric many mortgage lenders use when decising whether to lend.
yes I think a LOQBOX account is a good idea. It’s hard to say how much difference it will make, but it will show as a 1 year loan which you repaid on time by the time you make the mortgage application – so credit succesfully managed after your defaults.
Kay says
Superb.
So you reckon only make an application once the 12 months of the Loqbox is paid and not during? I only ask just in case I found someplace within 12 months.
Thanks for your advice.
Sara (Debt Camel) says
Late on in the 12 months it will show as a positive. Early on any credit harms your credit report even if you have made the first couple of months payments.
but honestly you are going to have a lot of problems getting a mortgage in the next year.
Kay says
Ok thank you.
Sharon says
I have just been discharged from a 1 yr Debt Relief on 20th Dec,2019 and am considering joining loqbox as I have been told this will help me improve my credit rating but, I do not understand how this can help if I am on the bad credit list for 5yrs,to be honest I am a bit baffled and would appreciate any advice from yourself concerning this.
Kind Regards
Sharon
Sara (Debt Camel) says
Your credit score is going to be bad for 6 years, but there are things you can do that will ensure after the 6 year point (a) no problems remain and (b) you already have some positive things on your credit history so your credit score will be great.
See https://debtcamel.co.uk/repair-credit-record-dro/. First sort out any problems!
Glen Stanmore says
Hi all
If I start and account with loqbox and after a year take out my savings in full. And then set up another years worth of savings which I take out 12 months later. Will this show as 2 successful loans paid over the past 2 years?
Thanks
Sara (Debt Camel) says
yes. it should.
steven says
I have completed my IVA early and im in the process of requesting all debtors tidy up my credit file with partially satisfied and such – these wont disappear until my 6 years is up, but my credit file now shows my IVA as completed so my credit rating has slightly improved.
would it be worth doing this – or wait until the 6yrs and everything drops off. i would rather start rebuilding my file now.
thanks in advance
Sara (Debt Camel) says
You won’t see much improvement by doing this now, but if you can get a years LOQBOX completed by the time everything else drops off at 6 years, then your credit record will have one great “everything repaid” loan showing. That will be much better than an “empty” credit record.
Steve says
It’s not empty now – I have 4 accounts upto date without missed payments and 2 loan accounts without missed payments but the negative stuff needs to show completed the same as the IVA. Which I have just finished with the tidy up letters – next month I will set up a loqbox and as soon as my file will allow I will get a credit card and use and payoff constantly for a year also.
Hopefully all will improve slightly – I am noticing month on month improvements now but they are small so I will have to wait until the 6 yrs for it to improve drastically.
stevi says
Hi Steve,
I hope you don’t mind me asking.
I too have just settled my IVA early and have two deptors on my file showing a default.
When you referred to having to contact them to tidy up your file, was it just a case of writing to them to ask for it to be removed?
Also even though you have paid your IVA early does this still remain on your file for the 6 years?
Many thanks
Stevi
Steve says
There are template letters to have the accounts changed to closed or fulfilled etc. Ask a debt camel advisor they can point u in the right direction.
any ccj or court items stay on file and can not be changed. All other accounts included within an iva will change the default to satisfied/closed etc but they remain on file for 6 years from the start date of your iva.
Michelle says
Will my credit drop after completion of LOQBOX and opening a new account?
Adam G says
Hi,
I am slightly confused about the timing of when to do this. I understand what’s it doing and how it’s working … but what no one has explained clearly (neither up here nor in the FAQs on LOQBOX site) that when is the best time to take this. My bankruptcy started March 2021. I will be discharged in March 2022. I understand it will probably stay on my credit file till March 2027? So Do I take this now BEFORE discharge – say from July 2021 to June 2022 so when they ask for a new account to be opened, I’d have been discharged from bankruptcy and can actually open a normal bank account and not a restricted basic or cash only account. Do I open after the discharge of bankruptcy so say LOQBOX from April 2022 to March 2023, or do I wait till after March 2027 when bankruptcy is off my credit file completely. Or in the last year leading up to it so say April 2026 to March 2027 so by the time Bankruptcy goes off my credit file, this gets added on as a loan repaid around the same time?
To simplify, bankruptcy made March 2021, discharge due March 2022 … which month is best to open a 12 month LOQBOX?
And while I am on the topic of bankruptcy vanishing from my credit file, can someone tell if that’s the case from Gazzete as well? So will google stop displaying my name at the top as bankrupt when someone searches my name or is that there forever?
Sara (Debt Camel) says
There is no really wrong answer… in practice your credit record will not get up to good until the bankruptcy marker goes after 6 years, but there are 2 reasons to use LOQBOX beforehand.
1) having some records of a LOQBOX “loan” being repaid on time means that when bankruptcy and all the debts in it goes from your credit record, then your credit record is not “empty” but has some good marks there
2) having repaid a LOQBOX loan may mean that you can access some sorts of high cost credit before the bankruptcy marker goes. For example a credit builder card. This in turn will improve your credit score if used properly (see https://debtcamel.co.uk/credit-builder-cards/) meaning you will end up with a very good credit score after the 6 year period.
However it is very unlikely that you will be able to get a “normal” bank account or any reasonably priced credit for the 6 year period.
I would say there is no point in rushing this. I don’t see anything to be gained by starting a LOQBOX before you are discharged. Keep your monthly savings somewhere where it is easier to access them.
Then after you have been discharged, wait a few months and then check all your debts have been properly marked as partially satisfied by your creditors, see https://debtcamel.co.uk/credit-file-after-bankruptcy/. When everything is clean, apply for a LOQBOX.
re the Gazette, see https://www.thegazette.co.uk/policies/removing-notices
Adam G says
Thank you, this clarifies it greatly.