How a Help to Save Account might boost your credit score
- winnie onyekwere
- Jul 3, 2023
- 3 min read
Who is eligible for a Help to Save Account?
If you’re working and are in receipt of Universal Credit or Working Tax Credit, you maybe eligible for up to £1200. You may well qualify for the tax free government scheme Help to Save Account https://www.gov.uk/get-help-savings-low-income/how-to-apply.
What is a Help to Save Account?
This is a new savings account that the government has introduced which allows you get a bonus 50p for every £1 you save over the next four years. The scheme allows you to save between £1 and £50 per month. Its important to note that you don’t need to put in savings every month in order to qualify. So, if you were to pay in £50 every month, over the course of 4 years you would have saved £2400. The whole scheme will run for 4 years, and the government will give you a bonus of £1200. At the end of the second and fourth year of the Help to Save Account scheme, the government will pay you 50% of the highest balance your account has reached during the two-year period even if you’ve subsequently withdrawn that money via your online account.
What happens if you stop being eligible for a Help to Save Account?
It’s important to note that you do not have to be on Universal Credit or Working tax credit for the whole four years. You can be on Universal credit this week, open your account today. Next week you may come off Universal Credit, however you can keep the account for the whole four years and withdraw money at any time. So, there is no reason to close the account. If you have less than £6000 in savings, it will not affect your benefit. This is an impressive account and worth applying.
What are the benefits of a Help to Save Account?
There some big pluses to opening a Help to Save Account. The interest rate is significantly higher than a traditional savings account. An important thing to understand is that due to inflation and money printing, your money placed in a traditional savings account is losing value by 10% every single year. https://www.wsj.com/articles/british-pound-falls-to-lowest-level-since-1985-11584537813. So, if you were to find a savings account that gave you at least 5% interest rate, you would still be losing 5% value of your money. That’s why the Help to Save Account is so good. It will offset that 10% lost from inflation which is really important.
The bonus received from this account is held at a very impressive interest rate. This is hundreds of pounds offered by the government. If you were to compare that with the interest offered by the high street banks even at the current prevailing rates of interest, and given you are still actually losing money, this scheme gives you 50% of the highest balance your account has reached after 2 and 4 years. Having a savings account and a healthy balance can help to create a solid foundation to building and raising your credit score.
How does a savings account help with boosting a credit score?
Having a high yield interest rate account won’t directly boost your credit score but by the same token won’t reduce your credit score either. However, it could help you to maintain a positive credit score and here’s how:
1. Having money in a savings account means you are less likely to make late utility bill payments.
2. You are better equipped for emergencies, making it less likely to apply for a loan.
3. You are more likely to pay off your credit card or loans each month if you have a savings account, which is a major factor on how your credit score is calculated and a step to financial wellbeing and stability. If you want to get on the way to boosting your credit score and you are on a low income, consider opening a Help to Save Account
Winnie Onyekwere
We welcome views and opinions about the issues raised in this blog.
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