According to a study conducted by credit card provider, Aqua, families with a chequered financial history could be paying anything between £1089 and £1225 a year more than those with an excellent credit history.
With the pressures of debt repayments affecting many families, it will come as a further blow to those with poor credit records to know that their household expenses, car loans, broadband and energy bills include hefty premiums.
The study found that in some cases, an £8000 car loan could cost a household with a poor rating as much as £6798 in interest payments, compared to only £1198 for a family with a good credit score.
Cranfield Business School’s Dr John Glen, who carried out the recent research, said: “Simply put, poor credit is costing households in the UK billions.
“It’s alarming that often the people who need the most help are the ones who are charged more for everyday household products and services.”
These findings follow in the wake of previous research commissioned by Aqua that revealed a whopping 57% of adults in the UK are ‘at risk’ of being declined credit due to a poor credit rating.
James Corcoran, of Aqua, expressed how important it is for everyone to ensure they improve their credit rating to save in the long-term: “Our latest research shows that having a poor credit rating really does matter – it costs you money.
“The amount wasted every single year by having a poor credit is significant in terms of people’s disposable income and is the equivalent of an average family’s annual gas and electricity bill.”
See below for some basic steps you can take to improve your credit rating:
- It is vital that you keep up all agreed repayments, and ask for smaller repayments if you’re finding it too difficult.
- Register on the electoral roll at your current address.
- Only apply for credit you are likely to get.
- Make sure all debts are registered to your correct name and current address.
- Ensure you have no mistakes on your file, such as other people’s debts or payments.
- Stay below 50% of your credit limit. Maxing out your credit cards, for example will suggest to lenders that you find it difficult repaying what you have borrowed.
- Don’t open up too many credit cards as the more you’ll end up using, the harder it will be to keep up with your balances and payments.
- Lenders like the following on application forms – a fixed land phone line rather than mobiles, long-term employment history, long-term living in one place, and a long-term record with the same bank.