‘The Cost of a Poor Credit Rating’ – a report by Dr John Glen, Senior Lecturer at Cranfield Business School and commissioned by credit card provider aqua – finds that UK families with a poor credit score could be losing £342m a year as they are unable to access the most competitive broadband deals advertised by providers. This is an extra cost of £115 each year on household bills for the average family with a low credit score.
The latest report builds on aqua’s ‘Mind the Credit Gap’ report, which revealed that more than half (57%) of the UK adult population are at risk of being declined credit by mainstream lenders. Using figures from various national sources, from OFGEM to ONS, Dr Glen compared the cost of utility bills, mobile phone bills, finance for white goods and car loans, finding that an average UK household with a poor credit score could be paying £1,170 more across products and services than households with a healthy credit score.
Few people are aware of the importance of having a healthy credit rating, with previous research finding that almost three quarters (74%) of people aren’t aware that having a low credit rating could affect their access to broadband. Awareness was even lower amongst young people with only 24% of under 25 year olds knowing that a bad credit score might prevent them from getting a better deal on these bills. An alarming three-quarters (75%) of people didn’t know that their credit rating could prevent them from being accepted for direct debits, which are often cheaper than pay as you go or quarterly payments, to pay their households bills.
Mario Lupori at aqua credit cards suggests that most people aren’t aware that they could access more competitive broadband deals simply by improving their credit rating.
"Simply put, families with poorer credit scores are paying £342m extra each year on their broadband bills compared to families with strong scores. The good news is there are lots of manageable steps people can take to improve their credit rating, such as registering on the electoral roll, paying bills on time or simply correcting mistakes on their credit report.”
The aqua credit card was launched in 2002 to help the large number of individuals in the UK who could afford the credit but are left un-served by the mainstream credit industry.
Top tips for improving your credit score:
• Make sure you’re on the electoral roll
• Pay all your bills on time – paying even a couple of days late can make a difference
• Ensure there are no incorrect details on your credit record – check it regularly and if the details are wrong, correct them
• Try not to use more than 75% of your available credit limit
• It is helpful to have a credit card to build your credit record
• Look into a specialist credit card provider if you are new to credit or need to improve your credit rating
• Applying for more than four forms of credit in a year can lower your credit rating
• Do not apply for more than one credit product at a time, as each application can have a negative impact on your credit rating
• Close old credit card accounts and cancel old direct debits
• End financial associations with ex-partners. Whilst their credit rating won’t impact yours, holding a financial product jointly will
• Do not take out more than two forms of credit within a six month period
