Does Receiving Universal Credit Affect Your Credit Score? 

If, like many others, you have spent much of your life working to build up your credit score but are now receiving government support, it’s understandable that you’ll want to know precisely how Universal Credit might affect your credit score.

In this article, we’ll explain Universal Credit and whether it affects your credit score and discuss how it all relates to being able to purchase a car on finance. We’ll also provide valuable insights into improving your credit score. So, let’s dive in.

What is Universal Credit?

Universal Credit is a support allowance the UK government provides to help those on low incomes manage their living costs. It is designed to support people of working age who are struggling financially, including those who are out of work, unable to work, or in work with a low income.

To be eligible for Universal Credit, you must meet specific criteria:

  • Be aged between 18 and 66 (below state pension age).
  • Live in the UK.
  • Have less than £16,000 in savings or investments.

Universal Credit Replaces Several Benefits

Universal Credit has replaced several benefits and tax credits, streamlining the support system. These benefits include:

  • Child Tax Credit.
  • Housing Benefit.
  • Income Support.
  • Income-based Jobseeker’s Allowance (JSA).
  • Income-related Employment and Support Allowance (ESA).
  • Working Tax Credit.

This shift in benefits systems means that, unless explicitly stated otherwise according to your circumstances, you can no longer claim under these previous benefit schemes.

Understanding Your Credit Score

Your credit score, sometimes called your credit rating, is a three-digit number that reflects your credit history and likelihood of repaying credit. It plays a crucial role when applying for financial products such as loans, credit cards, or vehicle finance.

Different UK credit reference agencies (CRAs), including Experian, Equifax, and TransUnion, use different scales to define credit ratings. A higher score typically indicates responsible credit management. To find out more on credit scores, check out our blog:

Does Universal Credit Affect Credit Scores?

The simple answer is no; claiming Universal Credit does not affect your credit score. Your credit score is primarily determined by factors such as your borrowing history, outstanding debts, and ability to make timely and complete repayments. It is not influenced by the source of your income.

In other words, whether you are self-employed, have a part-time job, or receive Universal Credit, you can still build and maintain a good credit score by consistently paying your bills in full and on time.

Does Universal Credit Appear on Your Credit Report?

No, Universal Credit, or any other source of income for that matter, does not appear on your credit report. Your credit report focuses on your debts and credit agreements, not your income sources.

However, it’s important to note that lenders may request proof of income when applying for finance. While Universal Credit won’t show on your credit report, you may need to provide your award notice or other forms of proof to confirm that you are receiving Universal Credit.

Can You Get Car Finance If You Receive Universal Credit?

There’s a common misconception that receiving benefits like Universal Credit automatically disqualifies you from getting car finance. However, eligibility for car finance varies from lender to lender, and each has its own criteria.

When considering your car finance application, lenders assess various factors to ensure that the finance they offer is affordable. Some lenders will not accept you if you receive benefits. However, if you work and receive Universal Credit, some lenders like Marsh Finance consider it an ‘additional income.’

How to Improve Your Credit Score

Building and maintaining a good credit score is essential for securing favourable financial terms. Here are some tips to help you improve your credit score:

  1. Register on the Electoral Roll: Being on the electoral roll confirms your address and boosts your credit rating.
  2. Pay Your Bills on Time: Timely bill payments demonstrate your reliability as a borrower and enhance your credit rating.
  3. Reduce Your Debt: Avoid maxing out your credit cards and reduce your debt levels, as high credit utilisation negatively affects your credit score.
  4. Check Your Credit Report: Regularly review your credit report for errors and discrepancies. Correcting inaccuracies can positively impact your credit score.

Check out our blog here for further information on improving your credit score.

Receiving Universal Credit does not impact your credit score. Your credit history, outstanding debts, and repayment behaviour determine your creditworthiness. While Universal Credit won’t appear on your credit report, lenders may request proof of income when applying for financial products.

At Marsh Finance, we understand the importance of reliable transportation. We consider Universal Credit as additional income and have straightforward criteria to help you get the car finance you need. Applying with us is fast and efficient, and you can find out if you’re pre-approved on the same day without impacting your credit score.

Don’t let misconceptions about Universal Credit hold you back. Focus on managing your finances responsibly, and your credit score will reflect your creditworthiness. If you’re in need of car finance, consider Marsh Finance as your trusted partner on your financial journey. Click here to apply with us today and take the first step towards owning the vehicle you need.

Representative Example

Rates from 12.9%

Representative example: borrowing £10,000 over 60 Months with a representative of 23.0% APR, an annual interest rate of 23.0% (fixed) and a deposit of £0.00, the amount payable would be 59 repayments of £269.58 per month, with one final repayment of £279.58 (which includes the option to purchase fee of £10.00), with a total cost of credit of £6,184.80 and a total amount payable of £16,184.80. Marsh Finance Limited are a lender, not a broker. 

Marsh Finance Limited are a lender, not a broker.

This is for illustrative purposes only and is not a quote or an offer of finance.