Steer your credit score in the right direction with these tips

ANYBODY who has a tainted credit profile or limited credit history will know that it can be extremely difficult to get accepted for a card, loan, overdraft or mortgage.

On top of this, new findings reveal they could also be paying more for household goods and services including energy, mobile phones, broadband, credit cards, white goods and cars purchased on finance.

The Cost Of A Poor Credit Rating report, commissioned by credit card provider Aqua, reveals that having a less than squeaky-clean credit history could cost a middle-income household an average of £1,170 more a year than if their score was healthy.

For example, families with lower ratings can typically only access rolling monthly contracts, meaning they could face an annual bill of £174.48 for an average broadband package to avoid being credit checked. This compares with £59.88 for those with a good score.

Equally, an £8,000 car purchased on a finance package would cost someone with a poor credit rating £6,798 in interest payments, compared with £1,198 for those with a better score.

When it comes to energy, those with a poor rating could have to fork out an additional £110 each year because they don't qualify for the cheaper "fixed-price" tariffs.

"Poor credit is costing UK households billions of pounds," says the report's author, Dr John Glen from Cranfield Business School. "It is alarming that often the people who need the most help are the ones who are charged more for everyday products and services."

This is a view shared by Paul Crayston from National Debtline.

"This is another way in which vulnerable households can be hit by the poverty premium," he says. "There is a general trend towards poorer households having to spend more to access and goods and services.

"Credit is no different. This can trap households in a cycle of poverty that they can struggle to escape from."

Companies charge higher rates to those with a poor credit rating because they view them as more risky, and more likely to default on a payment. For example, energy providers run credit checks on individuals and, if their score is low, charge them a higher tariff just in case they fall behind.

"It is of course understandable that credit providers need to charge people more when they deem there is a greater risk of default," adds Crayston. "There are no easy solutions."



The findings demonstrate clearly just how important it is to have a healthy credit rating.

"A poor credit score can really affect the price you pay for all sorts of products and services," says Sarah Willingham from finance expert

"Those with a good rating can save themselves thousands a year."

There are many simple ways that those with a poor score can boost it:

Make sure you are registered on the electoral roll at your current address.

Check that all the details are correct on your credit record. You can request a copy of your credit report for £2 from one of the three main agencies:, or

Ensure any errors are amended. For example, you can put a "notice of correction" on your file explaining any past problems, and why things are different now. Creditors will then review your credit history manually.

Make sure you pay all your bills on time, as missing the date by just a few days can make a big difference.

Only apply for credit when you need it, as applying for more than four forms of credit a year can lower your score.

Do not apply for more than one credit product at a time as each application can affect your credit score.

Make sure you close old credit card accounts and cancel old direct debits.

Try not to use more than 75 per cent of your available credit limit.

End financial associations that are no longer relevant, such as those with ex-partners.