Poor credit ratings costing families £billions
Published by Max Salsbury for 24dash.com in Communities and also in Finance
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Families are wasting their cash unnecessarily by missing out on the best tariffs, adding £hundreds to the cost of household expenditures like utility bills and mobile phone contracts, a report has revealed.
The average family with a low credit rating spends an extra £1,170 each year across mobile phone contracts, utility bills, broadband, credit cards, white goods and cars purchased on finance, according to ‘The Cost of a Poor Credit Rating’ by Dr John Glen, senior lecturer at Cranfield Business School.
Using figures from sources such as OFGEM and the ONS, Dr Glen compared the cost of utility bills, mobile phone bills, white goods and credit card payments for those with healthy credit scores to those with weak scores.
The research found households with a poor credit score can pay anywhere between £1,089 and £1,225 more than those with healthy credit scores. The greatest impact was felt by families with children (i.e. middle income families with more occupants).
The report discovered that having a poor credit rating affects the cost of what people buy across a range different household goods and services.
For example, families with a lower credit score and who need to avoid being credit checked can typically only access a month-by-month broadband contract meaning they face an annual charge of £174.84, whilst those with good scores pay only £59.88. Meanwhile, an £8,000 car purchased on finance would cost someone with a poor credit rating £6,798 in interest payments versus an average of £1,198 for someone with an excellent credit rating.
Dr Glen 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. “