Brits Should Get Scores in Shape Now to Avoid Christmas Credit Hangover

Written by Karen Bryan

christmascardOne in five (21%) British households are already worrying about festive expenses and nearly a quarter (24%) say they will take out a new financial product – such as a credit card – to help manage the cost of Christmas.

But while 70% will visit a price comparison site before applying for a new card, and over one quarter (27%) turn to trusted news articles to find the best deals on the market, only one in five (23%) will check their credit score. In fact, less than half (45%) of card-carrying Brits have checked their score in the last year and 30% have never checked their score.

Brits should be taking simple steps to boost their credit score now if they want to reduce the cost of Christmas borrowing. Yet 42% of people don’t know their credit score can affect how much credit card interest they pay, according to new research from ClearScore1.

A person’s credit score is one of the most important numbers you have. A poor score can affect someone’s ability to access the best financial products. For example, the difference between a ‘low’ and ‘excellent’ score could mean £20,000 in extra interest repayments across a lifetime – nearly the equivalent of a year’s annual take-home salary.2

Despite this, 44% don’t realise their credit score affects their chances of being accepted for a credit card and less than half (42%) know the interest rate they’re offered is also impacted by their financial history. Brits don’t check their credit report because they don’t want to pay to access their data – 34% cited this as the main reason.

Justin Basini, CEO of free credit checking service ClearScore, said: “For many people, Christmas inevitably involves some level of short term borrowing as a way to spread the costs, often using a credit card. The important thing is to keep that borrowing under control and pay as little in interest as possible. Lenders reserve the lowest rates for those with better credit scores, so it pays to start improving yours now.”

An analysis of the credit history of ClearScore’s 2.6 million users since 2012 shows that January is consistently the most popular month for credit card applications, meaning there is plenty of time to boost your credit score.

To help people track and improve their credit score over time, ClearScore has built the free Timeline tool, available at ClearScore.com, which allows people to track their debt levels along with providing advice on how to improve their credit score.

How to improve your credit score:

By actively managing your credit score, you will ensure that you get access to the best products on the market – here are Justin’s top tips for improving your score and saving yourself a tidy fortune:

  1. Sign up to see your credit score – you can get can your free score and report at ClearScore and track your progress using our handy Timeline.
  2. Check your report thoroughly, regularly and always before applying for credit – report and correct any mistakes you see as this could be damaging your score.
  3. Make sure that your bank and any credit providers have your correct address.
  4. Ensure you’re registered on the electoral roll – this is a very simple way of boosting your score.
  5. Make sure that your name is on some utility accounts – the greater the evidence that you borrow and repay your credit regularly, the better your credit score will be.
  6. Your score will increase if you use a smaller percentage of your available credit limit.

About ClearScore:

ClearScore is a free service which allows consumers to access their credit report and scores for free as often as they need or want. As well as offering a 100% free service, ClearScore also guarantees privacy – promising to never sell customer data. ClearScore has partnered with credit reference agency and insights provider Equifax to deliver the credit reports and score data. The product matching service is delivered in partnership with TotallyMoney.com. 

Sources

1 Based on responses of 1000 adults (aged 18 years and above) conducted by 3Gem over period 22.09.16 – 27.09.16.

2 ClearScore compared the difference in credit card interest paid by someone with a lower credit score with that of someone with a higher credit score and found that this was more than £20,000 across a lifetime – more than the average annual UK take-home salary. A typical credit card APR rate offered to someone with a low credit score is 36.5% compared to 20% for someone with an excellent score (based on DeFaqto data). The average UK household credit card balance is £2,426 (The Money Charity, September 2016). The lifetime cost assumes paying the minimum repayment per month and adults using a credit card for fifty years. The average UK take-home salary is £21,996 (BBC, 2016).