UK Households With Poor Credit Scores Face £6,678 Blow on Loans – Survey Warns
A fresh warning has been issued to UK households as those with weaker credit scores could end up forking out thousands more in loan repayments compared to their higher-scoring peers.
According to a new survey by TotallyMoney, a person with a poor credit rating could be charged as much as £6,678 more in interest on a standard £5,000 loan over three years than someone with an excellent score. The numbers get even starker with higher borrowing.
In one eye-watering example, the findings reveal that a £10,000 loan taken over three years could cost someone with a poor credit history up to £13,541 in interest, compared to just £911 for those with a strong score. That’s a jaw-dropping difference of over £12,000.
This isn’t just theory, it’s real money out of real people’s pockets. Alastair Douglas, CEO of TotallyMoney, noted how millions could be unwittingly paying more than necessary simply because they haven’t checked their own credit data.
“Before applying for any loan, check your credit report, and make sure all the information is correct and up to date. If you spot an error, then raise a dispute.
If you have time before applying, start taking the right steps to improving your score, it could save you hundreds, if not thousands of pounds.”
Surprisingly, the data shows that only one in four UK adults has looked at their credit report in the last four years. Of those who did, nearly a third found mistakes. Those errors could lead to higher interest rates, loan rejections, or worse, spiralling debt.
“Some apps will charge you to check your report, but remember that it’s your data, and you should never have to pay for it. It’s also important to shop around for your best options, and that means checking comparison sites and going directly to different lenders.
Always look out for offers that come with pre-approval and guaranteed rates and lengths. That way, you can avoid rejection, and you’ll know that you will receive the exact same loan you applied for.”
The impact of a poor credit score isn’t limited to just higher repayments. It can mean fewer options, rejection by mainstream lenders, and a stronger likelihood of falling into a debt trap.
Andrew Hagger, Personal Finance Expert at Moneycomms.co.uk, shared a stark reality check: “It’s only when you see the staggering extra costs, in terms of pounds and pence, for having an imperfect credit record, that the importance of protecting your credit file and score hits home.
“Customers faced with higher borrowing rates can easily find themselves struggling to manage a spiralling debt situation. Something that can be difficult to escape from unless you’re very disciplined with your budgeting.
If you’ve had credit issues in the past, lenders you apply to in the future will assess you as a higher risk of defaulting and hike the price their products to reflect this, it may seem unfair, but it’s the harsh reality when it comes to borrowing money.”
This research paints a worrying picture for many UK households already battling with inflation and rising living costs. Poor credit could silently drain their finances, making borrowing not just expensive but financially devastating.
Experts advise Brits to take control: check your credit file, dispute any inaccuracies, and improve your score gradually. In the end, these simple steps could mean the difference between manageable repayments and financial strain.
