Having a poor credit rating is costing UK householdís a monumental £3.5 billion each year, a leading credit card supplier has identified.
Aqua, conducted a study in order to gauge the affects that having a poor credit score has on the amount a consumer has to spend each year on vital credit related commodities, such as mobile phone contracts, utility costs, credit card rates, white goods and vehicles purchased through finance.
And the research compellingly revealed that the average family with a poor credit score spent an extra £1,170 on their mobile phone, utility, internet, credit card and white itinerary last year, due to the typically higher rates quoted by providers when they detect a less than desirable credit rating.
This figure amounts to as much as the average spend on shopping over 4 months, a yearís worth of electricity and gas or two and half months worth of childcare, the study revealed.
When breaking down the costs individually, the report outlined that individuals with low credit scores paid on average £974 more per annum paying back their car finance loans, £483 on paying credit card costs, £402 on their mobile phone bill and an astonishing £954 on white goods.
Families were identified as the group at most risk of being financially inhibited by having a low credit rating, with the average single child household having to fork out an added £1,225 each year on essential services and goods.
The findings signify the overarching importance of maintaining a good credit rating in the current era, with access to credit far from being the primary reason to do so.
Having a poor credit score in todayís world means that you will have to pay a far higher price for a number of services and goods, and with inflation consistently outstripping rises in worker wages, keeping the cost of living to a minimum is of paramount importance.
As such, taking measures to ensure that your credit file is always positive and strong is one of the best routes you can take to ensure that expenditure costs are kept down, because the reality is that having a poor credit rating is a sure fire way to ensuring that you pay over the odds for vital and essential areas of daily expenditure, such as on your utility and mobile phone bills.
The reportís author, Dr John Glen of Cranfield School of Management, 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.”
Steps you can take to improve your credit rating
Whilst the reality that it is essential to have a good credit rating might seem daunting, there are nevertheless a multitude of measures that you can take in order to ensure that your file is always kept in good stead and does not detract service and goods providers from overcharging you on your vital areas of compulsory expenditure.
Use Experian and Equifax to analyse your credit score, so that you are aware of where you stand and whether it is necessary for you to take steps to improve its condition. Moreover, you can evaluate it to see if there are any erroneous black marks against you name, so you can contact the agency and have them removed.
Once you have determined the current condition of your credit score, it is essential that you avoid applying for further credit if you are aware that it is particularly poor. This is because there is a high chance that you will be rejected, and this will have a further adverse affect on its rating.
Ensure that you are on the electoral roll, because your registration is utilised by creditors in order to conduct identity and fraud checks. The fact that your creditorís have easy access to your information is a positive sign for them about you as a creditor, and will increase your chances of acquiring a loan in the future.
If you are currently in possession of a credit card (s), then make sure you do not go to over 75% of its limit, and make more than just the minimum payment each month.
Make all of your bill payments on time, and ensure that you always have enough money in your account when having a direct debit set up to it so that you do not go into an unauthorised overdraft. All late payments have an adverse affect on your credit rating, so make sure you always make your contractual payments on time.
Look into getting a credit builder card from a bank. These are special credit cards that are given to people with poor credit ratings to bolster its value. The bank will allow you to place your own money into the new account and utilise it as credit for 12 months. You must then make all the monthly payments on time, and providing that you do so, your bank will give notice to this to your credit agency, who will update your file in a positive manner.