ONE million Brits will have their credit scores scuppered by the energy crisis, based on credit experts.
Three million households shouldn't cancel their energy bill direct debits to protect their credit scores.
The research comes from Credit Karma, after more than three million Brits have asserted they plan to cancel their energy direct debits in October.
Analysis of 40,000 households who missed a payment for a household bill between March 2023 and May 2023 showed that 63% saw an adverse impact on their credit score within 3 months of missing just one payment.
Your credit score may have a huge impact on whether you can get the best charge card, mortgage and loan deals.
Those with poor credit scores are less likely so that you can take a loan through regulated avenues.
Akansha Nath, head of partnerships at Credit Karma said: “Cancelling direct debits and missing repayments may have a direct impact on your credit rating.
"If you are concerned about making repayments, explore all of the available help accessible to you, from government support, to repayment extensions out of your provider."
It is estimated that 31% of those that have had their credit rating skewed after missing and energy payment happen to be recategorized as subprime borrowers.
This means they are less likely to obtain a great deal on credit and even if they're accepted for credit, it will be in a more expensive.
Borrowers with less-than-perfect credit ratings will pay significantly more to borrow compared to those with top ratings, using the difference amounting close to lb2,700 annually on mounting close to lb2,700 a year on credit cards, car finance, mortgages and short term loans.
Over an eternity of borrowing that difference could add up to or lb129,000.
And if these people can't afford higher rates many could be pushed to gain access to riskier unregulated credit through buy now pay later platforms and payday loans companies.
From October 1, all households will begin to receive a lb400 energy bill discount.
The payment is going to be dished out from your energy supplier and will be split across six discounts between October and March next year.
Households will receive a lb66 energy bill discount in October and November along with a discount worth lb67 in December, January, February and March.
In November, a lb300 one-off "Pensioner Cost of Living Payment" is going to be paid out to eight million households.
It will be presented to people who already obtain the winter fuel payment – that is worth between lb100 and lb300 for those over state pension age.
Millions of households are in line to get the lb150 Warm Home Discount between December and March 2023.
Check if you can have an energy grant
There are lots of energy grants and schemes available to assist you if you're struggling.
British Gas has recently confirmed that it'll pay its most vulnerable customers grants worth lb750 to assist with sky-high bills.
The British Gas Energy Trust has previously paid struggling households as much as lb1,500 – and you don't need to be a British Gas customer to try to get this help.
Ask your supplier what's on offer and how to apply, or check here:
- Bulb energy fund
- EDF's energy customer care fund
- E.on's energy fund
- Octopus Energy Octo Assist fund
- Ovo's debt and energy assistance
- Scottish Power's hardship fund
You can get free debt advice
If you're indebted there are plenty of services you can make the most of and they offer free suggestions about how you can manage debt.
Most of these can provide you free guidance and assist in person, over the telephone or online.
- Money Helper – 0800 138 7777
- Citizens Advice – 0808 800 9060
- StepChange – 0800 138 1111
- National Debtline – 0808 808 4000
What is the credit score?
Your credit rating, sometimes called credit rating, determines your creditworthiness to lenders.
One thing that confuses many people is the score you're given if you look at your rating.
All three companies have different scoring systems and there's no universal rating or score.
Experian will rate you on a scale of 0-999, Equifax from 0-700 and TransUnion from 0-710.
For the 3, the higher your score, the better your rating.
Keep in your mind these scores aren't a guarantee – just a sign of how favourably a lender is likely to view you.
How can one view my score free of charge?
All three CRAs offer you the opportunity to view your score, report and more for any fee every month However, you can get your hands on your score for free without paying for a subscription.
For on-going monitoring, here's what the three credit reference agencies provide:
- Equifax: You can check your score and report free of charge for the first 30 days, after which it's lb7.95 per month.
- Experian: You can check your score for free using its online service. But when you need to look at your report itself, you can only do that for free utilizing a 30-day trial, then you'll pay lb14.99 a month.
- TransUnion (formerly Call Credit): You can sign up to its Credit Karma service for free to get unlimited access to your report and score for life.
You also have a legal right to request a statutory report on data that credit reference agencies hang on you however this won't include your score. You can usually make an application for this on a credit reference agency's website or by post for free.
Alternatively, you can check your credit rating free of charge while using following organizations:
- ClearScore: ClearScore uses Equifax's data to supply both your score and report free.
- MoneySavingExpert.com: This tool uses Experian's data to provide your score and report for free.
How are you able to improve your credit score?
While there is no credit blacklist which bans people from any sort of borrowing at all – if you have struggled previously you may find lenders won't consider you.
If that's the situation then there are steps that you simply decide to try help improve your rating:
- Get around the electoral register – This proves what you are and where you reside meaning it's simpler to get credit if you're out there. Also check the electoral role for any errors. You can sign up by registering to vote.
- Don't make too many credit applications – Making lots of requests inside a short period of time can be seen as a manifestation of bankruptcy – and every application will be documented on your file. Make use of a "soft-search" eligibility calculator to show how likely you're to become accepted.
- Always pay your bills – Late payments will also be recorded in your file so be sure you pay your regular bills on time including utility and credit cards.
- Pay down your debt – Try and cut down your overall debt before you apply for new credit as lenders might be unwilling to lend to you should you already a large amount of debt.
- Use a credit-builder credit card – These cards generally have high interest rates when compared with normal cards but when you can show you're an accountable spender with them, it may improve your chances within the eyes of lenders.