Warning anyone with a credit card could be forced to pay 'extra' £872

New research by TotallyMoney has found that for the average balance of £2,906 on a credit card, somebody with a poor credit score could pay an extra £872 per year

People with a poor credit score are paying an extra £872 credit card interest, it has been found. New research by TotallyMoney has found that for the average balance of £2,906 on a credit card, somebody with a poor credit score could pay an extra £872 per year in interest compared to somebody with a good credit score.

Half of credit card customers pay interest on their borrowing every month but people with better credit scores will be more likely to have access to the best cards with the longest 0% offers, and lower follow-on interest rates. Those with poor scores will likely be eligible for fewer products, with shorter offer durations, and higher interest rates.

Alastair Douglas, CEO of TotallyMoney said “One in two adults are at risk of paying almost £900 more in credit card interest every year. For some, this might simply be because of an error on their credit report — which can be fixed with what’s known as a ‘notice of correction’. This scenario could be even more likely if you’re one of the 4 in 10 adults who’ve never checked their credit score. For others, a poor credit score could be due to missed payments or having used too much available credit in recent years.

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“But even though it might take time to build or rebuild your credit score, it’s never too late. One of the best things you can do is to take control and sign up to a free credit report service. Any good provider should be able to tell you what’s holding you back and give you a personalised plan to help you get on track.

“Just getting on the electoral roll, fixing something which is wrong, or sending the right signals to banks can all help to increase your score. Improving how you look to lenders is essential to accessing the best offers, which in the long run can save you money and help you build a better financial future.

“Unfortunately, the current system is flawed, and those in the worst situations are likely to be paying the highest rates of interest, further adding to their financial problems. So it’s also worth keeping an eye out for banks who make their lending decisions using open banking data. It might sound daunting or complicated, but it’s a simple and secure way for you to manage your money, and for banks and financial institutions to assess your creditworthiness. And because of that, it’ll give the lender a more accurate view of your finances, and you could unlock a wider range of more personalised options.”

Andrew Hagger, Personal Finance Expert from Moneycomms.co.uk said “The ongoing cost of living squeeze means that some consumers will be unable to keep on top of borrowing costs, leading to late or missed payments on their financial commitments.

“As a result, credit records will be tainted and will lead to much higher interest rates if customers look for personal loans or credit cards in the future. The cost of having a poor credit record will hit home when people realise that they’re no longer eligible for best buy card offers and suddenly face credit card rates of 40% APR plus if they apply for new plastic.”