2 shocking financial untruths many people believe, and how they could affect you

In today’s world, we are exposed to a flurry of information that might sometimes feel overwhelming. It is easy to believe everything you read, but when it comes to your money, falling for financial myths could have costly consequences down the line.

Indeed, research shows that there are two key financial untruths that could negatively affect your financial behaviours, and potentially cause unnecessary stress for your loved ones too.

Luckily, your financial planner can dispel these myths and help you achieve your goals by providing bespoke guidance.

Read on to find out the two most common financial untruths many people believe, and the impact they could have on you and your family.

Most people in the UK falsely believe in a “credit blacklist”

It is more than likely that at some point in your life, you have needed to check your credit report.

Your credit report takes your financial behaviours and circumstances into account, producing an estimate of reliability and affordability for lenders to assess when considering an application for a mortgage or similar loan.

Your credit report is an important aspect to consider when buying a new home, for example, or applying for a business or personal loan.

However, research shows that many people in the UK misunderstand how credit ratings work, which could affect your financial behaviours when preparing for a mortgage or credit application.

Indeed, research conducted by Experian, published by MoneyAge, found that 75% of people falsely believe in a “credit blacklist”.

This fictional “blacklist” could make people over-concerned about the impact of their financial behaviours, creating unnecessary worry when they apply for a loan.

In truth, there is no “blacklist” for creditors to check when you apply for a loan, and you can’t be banned from taking out a loan altogether, as is widely believed.

Instead, your financial history is considered by the specific lender in question, and their decision is often aided by the status of your credit report.

Some factors that may negatively affect your credit report include:

• Any unpaid debts in your name
• Unreliable or missed debt repayments
• Regularly dipping into your overdraft
• Applying for credit very often
• Having little or no credit history.

The positive news is that there are lots of ways to improve your credit report.

If you have fallen into poor financial habits over the years that have negatively affected your rating, there is always time to turn things around and improve your report.

Some ways to boost your credit rating could be to:

• Sign up to the electoral register
• Repay credit card bills on time
• Budget thoroughly so as not to frequently use your overdraft
• Only borrow what you can afford, to reduce the risk of falling behind on repayments.

If you are concerned about how your credit report may affect your loan or credit applications in the coming months, it may be wise to contact your financial planner for guidance.

Many Brits falsely believe Power of Attorney is only applied when you are already ill

Although it is not a pleasant thought, it is important to consider what might happen if you became incapable of making your own decisions in the future. This situation could arise following an accident or illness, for example.

If you could not access your own bank accounts, insurance policies, or mortgage documents, what position might that leave your family in?

Fortunately, there is a simple document, called a Lasting Power of Attorney (LPA), that can help. When you register an LPA, you appoint an attorney – who can be a spouse, other family member, friend, or trusted professional – who would take on your financial affairs if you could no longer make decisions for yourself.

To register an LPA, you can visit the government website, or speak to your financial planner who can connect you with the appropriate legal professional.

Despite this option being available to all people, research by Lloyds Banking Group has revealed that almost one-third of people believe a Power of Attorney is only put in place after a person becomes ill or injured. This is false; once you are incapacitated, it is too late to appoint an attorney.

By wrongly assuming you don’t need to worry about an LPA yet, your family could face costly and stressful consequences down the line.

Without an LPA in place, your next of kin would need to apply to become a “deputy” of your affairs through the Court of Protection. This can be an expensive and lengthy process that might make a difficult time even harder for your loved ones.

If you do not have an attorney appointed, contact your financial planner for more guidance.

Get in touch

For more information on how to avoid these financial untruths, or any other financial guidance, get in touch with us today. Email enquiries@prosserknowles.co.uk or click here to request a call back from one of our advisers.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.