Money Insider: Put your credit rating back on track with the help of good old-fashioned banking

It seems that barely a day passes without a bank or building society launching a new super-low-rate loan, an interest-free credit card or a cheap overdraft. However tempting this seemingly never-ending supply of low-cost finance may sound, the reality is that unless you have a pristine credit record you'll have little or no chance of being accepted for any of it. Whilst the tightening of lending policy will protect the bottom line for providers, the flip side is that a rapidly increasing number of people are now finding themselves excluded from mainstream credit.

Until now this has driven people to borrow from doorstep lenders, payday loans providers and loan sharks and paying interest of anything between 200 per cent and 2000 per cent-plus APR for the privilege.

Last week however there was at long last a glimmer of light when the Government announced details of a new initiative, aimed at providing an alternative source of affordable credit to people who can no longer borrow from the high street banks.

The scheme, run in association with the National Housing Federation and Royal Bank of Scotland, will start out as a pilot at 10 branches across the West Midlands. It will give people a genuine opportunity to get their finances back on track and repair their credit history in the process.

My Home Finance will not be a soft touch and applicants will have to undertake a 45-minute face-to-face interview to review their financial position in detail and to ascertain whether they have the capability to repay any credit advanced to them.

It is a move back to a time when your local bank's lending officer would sit down with you and discuss your application in depth, long before the days of automated scorecards and an instant computer-generated yes or no. Banks moved away from this individual assessment-style lending approach and have long since adopted automated and centralised functions in order to reduce costs.

The interest rates of 29.9 per cent APR and sometimes higher reflect the high administrative costs due to the in-depth customer appraisal and monitoring weekly repayments, plus it no doubt takes into account the possibility of higher than average defaults and write-offs. However, as this is a not-for-profit lending scheme it can afford to absorb the extra costs rather than having to account to shareholders seeking increased profits.

The My Home Finance initiative is a cheaper and more attractive alternative to payday loans and unregulated loan sharks where the interest costs can prove crippling, particularly for those already operating on tight budgets.

Let's hope this scheme proves to be a success and is rolled out on a wider basis, because the ultra-tight risk policies currently being applied by banks means huge swathes of people are no longer able to borrow from our high street lenders.

Halifax's new ISA

Most of the activity surrounding tax-free savings takes place at the beginning of the tax year, so it came as a bit of a surprise when Halifax launched its latest ISA last week.

This new variable rate ISA pays a market-leading 2.8 per cent plus an extra 0.2 per cent for Halifax current account customers. The account is opened with just £1, offers unlimited penalty-free access and is available online, by phone and unlike many best-buy products, in branch too. You'll need to review your account when the rate drops away after 12 months, but in the meantime this account should be the first port of call for any saver without an ISA. For a basic rate taxpayer to achieve 2.8 per cent net on a standard savings account they would need to find a gross rate of 3.50 per cent and that's simply not possible at present.

In the mortgage sector there has been further best buy action, including better news for first-time buyers. The Coventry Building Society hits the top spot with a new three-year fix priced at 3.59 per cent to 65 per cent LTV with a booking fee of just £199. For first-time buyers, the Co-operative bank and Britannia have trimmed the rate on 10-year fixed rates where you can lock in at 5.09 per cent with a £999 fee or a 5.29 per cent no-fee option, both up to 90 per cent LTV.

The credit card market continues to throw up great deals for those with a tip-top credit rating. This week MBNA launched two new market leaders. Firstly a 16-month 0 per cent balance transfer deal with 2.9 per cent fee, plus a 0 per cent dual offer on both balance transfers and purchases. The latter could prove a winner with Christmas around the corner.

Andrew Hagger is a money analyst at Moneynet.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Sport
Australia vs New Zealand live
cricket Follow over-by-over coverage as rivals New Zealand and Australia face off
News
Zayn has become the first member to leave One Direction. 'I have to do what feels right in my heart,' he said
peopleWe wince at anguish of fans, but his 1D departure shows the perils of fame in the social media age
Life and Style
Researchers found that just 10 one-minute swill-and-spit sessions are enough to soften tooth enamel and make teeth vulnerable to erosion
health
News
i100
Arts and Entertainment
The Regent Street Cinema’s projection room in the 1920s
film
News
Leah Devine is only the ninth female to have made the Young Magician of the Year final since the contest began more than 50 years
peopleMeet the 16-year-old who has set her heart on being the first female to win Young Magician of the Year
News
Jonathan Anderson was born in Northern Ireland but now based between London, where he presents a line named JW Anderson
peopleBritish designer Jonathan Anderson is putting his stamp on venerable house Loewe
News
Andy Davidhazy at the beginning (left) and end (right) of his hike
video
News
Taylor Swift is applying to trademark song lyrics from 1989
people
Voices
The popularity of TV shows such as The Liver Birds encouraged Liverpudlians to exaggerate their Scouse accent
voicesWe exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    Election 2015: How many of the Government's coalition agreement promises have been kept?

    Promises, promises

    But how many coalition agreement pledges have been kept?
    The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

    The death of a Gaza fisherman

    He built his own reef, and was fatally shot there by an Israeli gunboat
    Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

    Saudi airstrikes are fuelling the Gulf's fire

    Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
    Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

    The only direction Zayn could go

    We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
    Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

    Spells like teen spirit

    A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
    Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

    If fashion is a cycle, this young man knows just how to ride it

    British designer Jonathan Anderson is putting his stamp on venerable house Loewe
    Number plates scheme could provide a licence to offend in the land of the free

    Licence to offend in the land of the free

    Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
    From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

    From farm to fork in Cornwall

    One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
    Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

    Robert Parker interview

    The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
    Don't believe the stereotype - or should you?

    Don't believe the stereotype - or should you?

    We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
    How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

    How to make your own Easter egg

    Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
    Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

    Bill Granger's twist on Easter Sunday lunch

    Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
    Joe Marler: 'It's the way I think the game should be played'

    Joe Marler: 'It's the way I think the game should be played'

    The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
    Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

    Cricket World Cup 2015

    Has the success of the tournament spelt the end for Test matches?
    The Last Word: Justin Gatlin knows the price of everything, the value of nothing

    Michael Calvin's Last Word

    Justin Gatlin knows the price of everything, the value of nothing