ANYONE looking to establish a credit record can expect to be charged prohibitive rates to borrow, but a new TSB-backed initiative called Loqbox is being marketed as a pain-free alternative.

To get a competitively priced card, loan or mortgage, it is essential to have a good payment history, but many people struggle to establish one.

In some cases this is due to past debt problems, but it could also be because they have not borrowed before, are young, have been in the armed forces or recently moved to the UK.

Credit reference agencies such as Equifax, Experian and CallCredit help financial providers make lending decisions by scoring would-be customers on the basis of data collected to show if they are a good risk.

This includes whether they are on the electoral roll and if they have had court judgments or bankruptcy rulings against them, but the most important information is their credit history. If this is poor or non-existent, only lenders charging the highest rates are likely to consider them.

Traditionally, someone looking to build a good score could sign up for a costly credit-improver card or loan and make regular repayments in a bid to convince other lenders to take them on at better rates.

Loqbox, which is supported by TSB, promises to achieve the same result free of charge, while helping customers build up their savings.

It works by turning a pledge to make monthly deposits into debt, with the repayments appearing on the holder’s credit record.

Jatin Patel, TSB’s product director, said: “Loqbox will give hundreds of thousands of consumers who don’t have a good credit score, through no fault of their own, the opportunity to prove that they are creditworthy.”

Customers choose a figure between £20 and £500 to save every month for a year. In exchange, Loqbox gives them a savings voucher worth the total amount, which they pay for in 12 interest-free instalments.

If they are unable to make a repayment, which would show as a blemish on their record, they can opt to cash the voucher in early and get back the full amount saved.

Loqbox makes a profit in the same way as price comparison sites, by introducing customers to product providers. The only cost to the customer is the small amount of interest they lose by not putting the money in a conventional savings account right away.

Once they make a full year of payments, their balance is transferred free of charge to a new account with TSB or another provider of their choice, enabling them to access it or continue saving and begin earning interest.

Customers who choose not to open a new account will be charged £30 to have their money paid into an existing account. But if no provider will give them a new account, Loqbox pledges the money will be repaid without charge.

Tom Eyre, the firm’s chief executive, said: “We are passionate about helping make the financial system work for everyone, including those who have been excluded from it.”

Before Loqbox launched, there were few options for those without a good credit history who did not want to pay over the odds to borrow.

They could sign up for the Credit Improver service run by Loqbox’s parent company nooli, which costs £124.88 a year – with no cash return – to achieve the same end.

Or they could join a credit union. There are more than 400 of these financial co-operatives across the UK with around 1.3 million members. They are open to people who live in the local area or share another common bond.

Once members have established a savings record, they can borrow at competitive rates regardless of their credit score.

To improve your credit score, make sure you are on the electoral roll under your current address, and set up direct debits so you never miss a debt repayment.

Sever financial ties – including closing old accounts – shared with anyone who could damage your record by association.

Do not attempt to borrow more than you can afford, and cancel unused cards or credit accounts so you do not appear over extended.

Check the information held on you by credit reference agencies and ask for any errors to be corrected. They all offer costly membership packages, but you can view your file for just £2. This statutory report can be ordered from their websites.

For details of your nearest credit union, log on to or, or call the Association of British Credit Unions on 0161 832 3694.