{"id":7412,"date":"2022-05-31T19:48:44","date_gmt":"2022-05-31T19:48:44","guid":{"rendered":"https:\/\/ifg.local\/articles\/loqbox-a-novel-solution-to-bad-credit-rating\/"},"modified":"2023-11-24T12:04:40","modified_gmt":"2023-11-24T12:04:40","slug":"loqbox-a-novel-solution-to-bad-credit-rating","status":"publish","type":"post","link":"https:\/\/www.islamicfinanceguru.com\/articles\/loqbox-a-novel-solution-to-bad-credit-rating","title":{"rendered":"LOQBOX – Solution to Bad Credit Rating | Islamic Finance Guru"},"content":{"rendered":"

40% of the UK do not have an emergency fund of even \u00a3100 and regularly go into their overdraft. This means many people end up defaulting on payments and get a bad credit rating. And getting rid of a bad credit rating can be a nightmare.<\/p>\n

<\/p>\n

But there is now a really interesting solution to this.<\/p>\n

LOQBOX<\/a> helps customers repair their credit rating by letting them save \u00a0 a set amount (minimum \u00a320) monthly and tracking that they achieve that over 12 months. At the end, you get your money back interest-free. 85% of LOQBOX customers open a credit account within 6 months completing LOQBOX .<\/p>\n

But more on LOQBOX later. First, why are we at IslamicFinanceGuru even writing about this stuff?<\/p>\n

The Financial Exclusion Scandal at the Heart of Our Community<\/h2>\n

Financial services play a crucial role in most people\u2019s lives. Much of the population in most societies rely on bank accounts to receive their salaries and to pay their bills. Products such as mortgages, loans, insurance and pensions allow people to build families and save up for a decent retirement.<\/p>\n

However, there is still a significant minority of people, with the Muslim community featuring high among them, that are deemed to be financially excluded and cannot build a good credit score.<\/p>\n

Consequently, they encounter difficulties in accessing mainstream financial products and services that they need to live a normal social life in the society to which they belong[1]<\/a>.<\/p>\n

Several factors can result in financial exclusion including low-income, high-interest rates, unaffordable additional charges, lack of information and support, self-exclusion, disability, accessibility by geography, or cultural barriers.<\/p>\n

The Financial Conduct Authority did some research that found that those most likely to be on the brink of being financially excluded include unemployed people, those suffering an illness, those who are not literate, single pensioners, and single parents.<\/p>\n

It was also seen to be much more common amongst African-Caribbean, Pakistani and Bangladeshi households[2]<\/a>.<\/p>\n

In other words, the Muslim community is losing significant \u00a3\u00a3\u00a3 due to financial exclusion.<\/p>\n

The Credit Score is the Key to Solving Financial Exclusion<\/h2>\n

Your credit score is a three-digit number that indicates how reliable you are at borrowing and repaying money[3]<\/a>. When you have a good credit score, lenders trust you with their money, giving you better borrowing deals and saving you on additional costs you\u2019d pay on loans, mortgages, and access to credit cards.<\/p>\n

A bad credit score can stop you getting these products. Credit scores are generated by credit reference agencies (CRAs) who compile information about your financial history known as your credit report.<\/p>\n

When you apply to borrow money from a bank, the bank will look at your credit history to see whether you fit the criteria for being eligible to borrow. This is usually to ensure that you will be fully able to pay the loan back in time.<\/p>\n

Not all financial products will depend on the credit report system and some lenders will offer their products without undergoing a credit check on the consumer. Suits Me Card[4]<\/a> is one company that matches that very description.<\/p>\n

However, for most consumers the problem still remains and there are still companies that have popped up to solve the problem of financial exclusion such as LOQBOX.<\/p>\n

\"\"<\/a><\/h2>\n

What is LOQBOX?<\/h2>\n

LOQBOX<\/a> was founded with the mission to solve the country-wide problem of financial exclusion by helping those excluded from accessing fairly priced credit to quickly ramp up their credit score without losing a ton of money.<\/p>\n

LOQBOX is not a bank or lender itself, it is simply acting as an \u2018introducer\u2019. Credit is provided by DDC Financial Solutions, so if you take out a \u2018LOQBOX\u2019, you\u2019re effectively accepting a finance contract from DDC Financial Solutions.<\/p>\n

Your monthly repayments will therefore be based on that contract agreement which will help build your credit score over time, hence opening up credit opportunities to those otherwise financially deprived.<\/p>\n

How does LOQBOX work?<\/h2>\n

It is a remarkably simple yet effective process. LOQBOX grows your credit score by helping you prove your creditworthiness to credit reference agencies \u2013 the organisation that compiles and keeps your credit report.<\/p>\n

They have simplified the process with three simple steps: save, grow, and unlock:<\/p>\n

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  1. When you register with LOQBOX, you decide how much you can save comfortably over a year \u2013 a minimum being \u00a320 and a maximum of \u00a3200 per month[5]<\/a>. You buy a \u201cdigital savings voucher\u201d for what a 12-month payment plan would add up to. So, if you save \u00a3100 a month, it would be \u00a31200.LOQBOX then locks away a 0% APR (annual percentage rate) loan for that amount which is provided by DDC Financial Solutions in your LOQBOX account. They tell the credit agencies \u201cguys, we have a credit agreement with this customer for \u00a31200. We\u2019ll let you know how he gets on in keeping up with that.\u201dFor example, if you were able to comfortably save up \u00a31200, LOQBOX would lock away a loan for that amount over the repayment period of 12 months. The repayments of \u00a3100 monthly would be interest-free which is extremely helpful and opens the door to everyone previously left out from financial services.<\/li>\n<\/ol>\n
      \n
    1. Once you are successfully repaying the loan in your monthly instalments, the next step is growing your credit score. LOQBOX regularly reports your monthly loan repayments to the three main CRAs (Experian, Equifax, and TransUnion), which shows them that you are capable of handling the repayments of credit through the loan you are repaying, hence improving your creditworthiness.<\/li>\n
    2. The last step will unlock the money that you have repaid over the year into a new account and you can walk away with a dramatically improved credit score[6]<\/a>.<\/li>\n<\/ol>\n

      Here\u2019s a video summary of how LOQBOX works:<\/p>\n