LOQBOX Review – Should you use it to improve your credit score?
LOQBOX was founded by Tom Eyre and Gregor Mowat having grown frustrated with the lack of help and support that is available for consumers in the credit industry. Tom Eyre founded a paid-for service called Credit Improver in 2012 and with co-founder Gregor Mowat decided to create LOQBOX, an alternative and completely free solution for those wishing to improve their credit score.
But what is it and how does it work?
What is LOQBOX and how does it work?
LOQBOX is a tool designed to help build your credit score with the ultimate aim of giving you access to more lenders and better rates. LOQBOX works by reporting your monthly savings (which it classes as a loan) to 3 major credit reference agencies. The process of declaring the monthly payments shows that you can handle credit and improves your credit worthiness. It is currently only web-based but they are working on developing an app in the near future. It's a 3 part process that consists of saving, growing your score and then repaying a loan.
1 - Saving with LOQBOX
You can decide how much you want to save each year, between £20 - £200 per month. LOQBOX then multiplies the monthly amount by 12 and locks it away as a 0% loan, provided by DDC Financial Solutions.
For example: £100 a month x 12 = £1,200
Customers can pay either by monthly direct debit or by debit card. If you pay by direct debit, be careful when selecting your payment date as this cannot be changed once your account is set up.
2 - Grow your credit score
LOQBOX reports back to the three main credit reference agencies, Experian, Equifax and TransUnion (formerly Callcredit) as you pay back the loan each month. The payments show that you can manage credit which in-turn improves your credit score.
3 - UNLOCK your money
Your money is then returned to you for free, so long as you choose one of the selected accounts for the money to be paid into.
You can quit LOQBOX at any time and get your money back in full so you can unlock whenever and never be left in debt. Think carefully before you do because if you haven’t made enough regular payments, unlocking your money early could harm your credit history.
When you have reached the end of the 12-month agreement you must choose a savings account for the money to be paid into. LOQBOX has a number of partners that it works with, including TSB, RBS and NatWest. If you would rather the money was paid into one of your existing accounts then you can opt for LOQBOX's premium service and pay a £30 fee.
Is LOQBOX a loan?
No, LOQBOX describes itself as a 'cash redeemable savings voucher', where you use finance in order to purchase a voucher.
You are effectively committing to a repayment plan which credit reference agencies will view as a loan. The process demonstrates that you are able to pay back money regularly and consistently, without you having to apply for a costly traditional loan. The process should help to build your credit profile meaning you could get access to credit in the future and at better rates.
What happens if I miss a payment?
Missing a LOQBOX payment is a very bad idea if you are trying to build up your credit rating. Defaulting on a payment could be detrimental to your credit score and LOQBOX will notify the credit reference agencies.
On its website, LOQBOX advises quitting immediately if you miss a payment. If you leave the agreement early this can affect your credit score but will be better than missing a payment as that will harm your credit history.
How does LOQBOX make money?
In order to keep the service free for its users, LOQBOX receives a commission payment from the partner bank that you opt to have your money paid into. If you would rather not open one of its suggested savings accounts you can opt for the Flexi Unlock premium add-on. You'll have to pay £30 but means that you can have the money paid into your own account.
How long does it take for my credit score to improve with LOQBOX?
LOQBOX is designed to help you to improve your credit score over a 12 month period, but you should start to see an improvement within the first 3-4 months. LOQBOX advises that some users may see their credit score dip before it starts improving. It calls this the 'Credit Tick' and advises that if you leave during this time you could end up leaving with a worse credit score than what you started with.
Is my money safe with LOQBOX?
Your money is held in a Barclays bank account so you are protected by the Financial Services Compensation Scheme (up to £85,000) if the company is to go bust. LOQBOX is also authorised and regulated by the Financial Conduct Authority (FCA).
LOQBOX points promise
LOQBOX is so confident that you will grow your credit score with them that they're offering a points promise scheme, "Grow your credit score or we'll grow your savings". You can choose between three points promise packages which are summarised in the table below.
LOQBOX Points promise packages
How does the LOQBOX points promise work?
LOQBOX advise that if your credit score has not grown by 10, 25 or 50 points by the end of the 12-month contract it will pay you the interest you are owed, but this will depend on the plan you opted for at the beginning. You will need a screenshot of your credit score before you started LOQBOX and then at the end of the agreement to claim your interest payment.
The 25 and 50 points promise fees are deducted from your LOQBOX balance each month and if your credit score does reach the desired increase with LOQBOX, you will not be entitled to any interest. Those that are serious about increasing their credit score and are keen to improve it no matter the cost may find LOQBOX's points promise useful. Remember though that you could end up paying £120 to improve your score by just 50 points, which may actually end up costing more than the interest on a traditional loan or credit card. You can cancel the price promise at any time but you cannot switch between the plans.
What are the pros and cons of using LOQBOX
The pros of using LOQBOX
- It is free to use
- Helps to improve your credit score
- Helps you to save
- Protected by the FSCS
- You can access your money at anytime
The cons of using LOQBOX
- £30 charge if you want to access your money but don't want to open an account with them
- Don't get any interest for saving (unless you opt for a price promise and didn't see an increase in your credit score)
- Credit score is negatively impacted if you miss a payment
LOQBOX has a 4/5 star rating on Trustpilot. LOQBOX has over 1,300 reviews and 71% of the reviews rate it as excellent with comments confirming that their credit scores have improved and they like that it allows them to save at the same time.
11% of the reviews are bad with some commenting on poor customer service. Most of the poor reviews come from those that are annoyed that they had to pay £30 to get their money back at the end of the agreement. However, this is clearly stated throughout the LOQBOX site so is perhaps an unfair representation.
What are the alternatives to LOQBOX?
Building a credit rating with a credit card
If you have a poor credit rating you can also build your credit score using a credit builder credit card. These credit cards are specifically for people who have poor credit and therefore offer a lower maximum limit than most other cards, usually no more than £1,500.
Credit builder cards have a high APR (Annual Percentage Rate) which means you will pay a high amount of interest on the credit card balance, so it is best to pay it off as quickly as possible.
How to improve your credit rating with a credit building card:
- Pay the card off in full
- Do not miss a payment
- Set up a direct debit
- Try to keep your balance under 30% of your limit
There are various sites that will allow you to compare the best credit builder cards on the market as well as check your eligibility for the card and your chances of acceptance before applying.
If you want to know more about credit building cards, you can find the best credit cards for poor credit here.
6 Top Tips for improving your credit score without taking out credit
Damien and Lauren discuss the best ways to improve your credit score without having to take out credit or commit to any payment plans.
LOQBOX vs Credit Improver
Credit Improver was founded by Tom Eyre, who is also the co-founder of LOQBOX. It works in a similar way to LOQBOX however it isn't free. You have to buy the Credit Improver book for an initial fee of £14.99 followed by 11 monthly instalments of £9.99. You can pick a term length of 1 year, 2 years or 3 years, whereas with LOQBOX you can only currently sign up for 12 months.
With Credit Improver, you follow the advice in the book and your monthly payments are used to show credit lenders that you are credit worthy. Similar to LOQBOX, Credit Improver is so confident that your credit score will improve it offers a complete money-back guarantee.
Overall LOQBOX is a great idea, especially if you are struggling to build up your credit rating. Creating a product that helps you to save as well as improve your credit rating (without allowing you to spiral further into debt) is both simple and clever and makes you wonder why no-one has thought of it before. The slight downside is having to pay a £30 fee to get your money back (should you decide not to open one of the suggested savings accounts), however, this is made clear from the start and so shouldn't deter those that are serious about improving their credit rating.
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