‘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 £327m a year as utility providers charge them more for using their services. This is an extra cost of £138 each year on gas, electricity and water for the average family with a low credit score.
The new 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, and found 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 more than four in five (83%) people aren’t aware that having a low credit rating could affect their access to the cheapest utilities tariffs. Awareness was lowest amongst those aged over 55 with only 1 in 10 (12%) knowing that a bad credit score might prevent them from getting a better deal on their 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 utility bills.
Mario Lupori added:
"Most people aren’t aware that they could be getting a better deal on their utility bills simply by improving their credit rating. UK families are paying £327m per year extra on their energy bills as the result of poor credit ratings. This means the average family with a poor credit rating could be spending 12% more than the average family with a good credit score.
He added: "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 full report, including calculations and commentary from Dr John Glen, can be found at http://www.aquacard.co.uk/pdf/the-cost-of-poor-credit-rating.pdf
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. aqua creates innovative credit building credit cards and seeks to reward customers who look after their account – designed for people looking to improve or establish their credit rating. Representative 35.9%APR (variable). For more information, visit: http://www.aquacard.co.uk/.
Top tips for improving your credit score:
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Notes to editors:
*All stats unless otherwise specified are from Dr John Glen, and his team at Cranfield Business School. Full methodology can be found on page 3 of the report here.
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