New research reveals the heavy financial burden facing borrowers with poor credit scores in the UK. Those with low ratings could pay thousands of pounds more in interest compared to those with excellent scores.
Recent figures have highlighted a growing problem for millions of UK households: the cost of borrowing is sharply higher for those with poor credit records. A report from TotallyMoney shows that the financial gap between good and poor credit is far larger than most consumers realise.
Borrowers With Poor Credit Pay Thousands More in Interest
According to TotallyMoney, someone with a poor credit score taking out a typical £5,000 loan over three years could pay £6,678 more in interest compared to a borrower with an excellent score. For a £10,000 loan over the same period, the difference becomes even starker: a borrower with poor credit could face £13,541 in interest, while those with strong credit would pay just £911.
Alastair Douglas, CEO of TotallyMoney, stated: “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.”
He also advised borrowers to shop around and use comparison sites to avoid unnecessary costs, while warning against paid credit-checking services: “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 direct to different lenders”
Credit Checks and Error Disputes Can Prevent Financial Strain
One of the most striking findings in the report is how few people actively monitor their credit reports. According to TotallyMoney, only one in four Britons has checked their credit report in the last four years. Furthermore, 32% of those who did check found errors that could negatively affect their borrowing rates.
Andrew Hagger, a personal finance expert at Moneycomms.co.uk, explained: “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.”
By reviewing credit reports regularly, disputing errors, and seeking pre-approved offers, experts say households can avoid unnecessary financial penalties and reduce the risk of costly borrowing.
