But what is LOQBOX and how does it work?
What is LOQBOX and how does it work?
LOQBOX* is a suite of credit-building tools designed to help build your credit score with the ultimate aim of giving you access to more lenders and better rates. While it originally launched primarily as a savings tool (LOQBOX Save), LOQBOX is now much broader and offers a comprehensive paid membership, as well as a free 'Lite' version.
Currently, the full LOQBOX membership costs £2.99 per week. It includes three main credit-building features: LOQBOX Save, LOQBOX Grow, and LOQBOX Rent. Alternatively, for those who just want the basic features, there is a free 'Lite' membership where only LOQBOX Save is available.
1 - LOQBOX Save
Available on both the free Lite and paid memberships, LOQBOX Save allows you to build your credit score simply by saving. It works by reporting your monthly savings (which it classes as a loan) to 3 major credit reference agencies – TransUnion, Experian and Equifax. The process of declaring the monthly payments shows that you can handle credit and improves your credit worthiness. You can decide how much you want to save each year, between £20 - £500 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 using a 'Continuous Payment Authority' charge via a debit card. This is important because if members change their bank account or update their card details, they will need to update these within their Loqbox account to avoid missed payments.
2 - Loqbox Grow
Included in the full £2.99 a week membership, LOQBOX Grow is an interest-free credit account. LOQBOX gives you a credit limit and charges your weekly membership fee against it. You then pay this balance off each month. Because the membership fee is very small compared to the credit limit, it demonstrates 'low credit utilisation', which lenders like to see. These regular monthly repayments are reported to Experian, Equifax, and TransUnion to help build your credit history over time.
3 - Loqbox Rent
Also included in the paid membership is LOQBOX Rent. This tool allows you to build your credit history simply by paying your rent. By securely connecting your bank account via Open Banking, LOQBOX identifies your regular rent payments and reports them to Experian. It does not matter if you pay a private landlord, letting agent, or local council, as long as the payments are made on time.
Can you ask for your money back?
Your LOQBOX Save money is 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 partner banks that it works with, including TSB and Santander. 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. However, if you are a full £2.99 per week member, you receive a free 'Flexi-Unlock' after 26 weeks, allowing you to withdraw into your existing bank account without the £30 charge.
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?
LOQBOX generates revenue through its £2.99 weekly full membership subscriptions. For users on the free 'Lite' membership, in order to keep the service free, 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 and are on the free tier, 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 £120,000) if the company is to go bust. LOQBOX is also authorised and regulated by the Financial Conduct Authority (FCA).
LOQBOX was however targeted by scammers in February 2020 which meant that some customers' personal and financial data was compromised. LOQBOX contacted any customers that were affected at the time and advised them how to stay protected.
What are the pros and cons of using LOQBOX
The pros of using LOQBOX
- The core LOQBOX Save feature is free to use (via the Lite membership)
- Helps to improve your credit score
- Helps you to save
- Protected by the FSCS
- You can access your money at anytime
- The full membership includes automated rent reporting and an interest-free credit line
The cons of using LOQBOX
- £30 charge if you want to access your money on the free plan but don't want to open an account
- 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
- Full membership costs £2.99 a week, which works out to over £150 a year
LOQBOX Reviews
At the time of writing, LOQBOX has a 4.4 out of 5.0 star rating on Trustpilot. LOQBOX has over 27,000 reviews and 77% 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.
9% 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 Save Review - Summary
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 and report routine rent payments 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 if you are on the free tier (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. For those who opt for the full membership, the £2.99 weekly fee is an extra cost to consider, but the addition of LOQBOX Grow and Rent provides a comprehensive and accessible suite of credit-building tools.
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