With Brits paying interest on 54% of credit cards, those with a less-than perfect credit score or no credit history could be paying considerably more for their borrowing. Worryingly, the number of adults with no credit history at all has grown by 29% in the last six years†.
Poor credit scores and thin credit files can not only lead to customers being handed higher APRs on their borrowing, but they’re also likely to have access to fewer products, receive lower credit limits and be subject to shorter introductory offers. Additionally, they may end up paying more for other products too — seeing higher car insurance premiums, being forced onto more expensive prepayment energy meters, and finding themselves limited to pay-as-you-go SIM deals.
As inflation is expected to hit 11% in 2022, rising prices could mean that the average UK household would have to pay an extra £2,500 in 2022/23 to buy the same goods and services as in 2021/22†.
These added financial pressures may put more people at risk of missing payments or increasing their credit account utilisation which may lead to further credit score harm.
Additional YouGov research, commissioned by TotallyMoney found 51% of adults would have difficulty covering an unexpected bill of £500‡. That suggests that saving money by cutting interest on existing credit agreements could be a real difference to people’s finances.
Alastair Douglas, CEO of TotallyMoney comments:
“1 in 5 adults had their personal income impacted by the pandemic and do not expect it to recover in the next two years†. To make things even more difficult, inflation is now at a 40 year high, and the cost of household bills and everyday essentials is continuing to rise.
“With an extra £0.8 billion borrowed on credit cards in March and an annual growth rate of 10.8%§, figures suggest that consumers are turning to credit for help.
“When it comes to credit, a good score can give you access to the best offers, meaning you’ll pay less for what you borrow. Those savings can be put towards paying off existing debts quicker, or to help navigate the increased cost of living. Checking your credit report is free and doesn’t affect your score. So I’d urge everyone to do so.
“Anybody struggling to keep up with repayments should contact their lender and seek assistance at the earliest opportunity. It may seem daunting at first but it could help you avoid defaulting on a repayment which can leave a mark on your credit report for years to come.
“At TotallyMoney we’re on a mission to help everyone move their finances forward. One way we’re doing this is by providing customers with their free, live credit report and score, putting them in control of their own financial data and providing them with all the information they need to gain financial momentum. Since joining TotallyMoney, over 50% of our free credit report customers have seen a score increase within 12 months‖.”
Andrew Hagger, Personal Finance Expert from Moneycomms.co.uk said:
“It’s inevitable that some consumers will face a chronic financial squeeze this year, leading to late or missed payments on their financial commitments.
“As a result, credit records will be damaged and mean far higher interest rates if customers look for personal loans or credit cards in the future.
“The cost of having a poor credit record will come as a big shock when people realise that they’re no longer eligible for best buy card offers and suddenly face credit card rates of 30% or 40% APR if they apply for new plastic.”
By improving your credit score you can unlock the most competitive offers and the best rates, saving you money and helping you move your finances forward.
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