16 million Brits making 1 credit card mistake costing ‘thousands’ | Personal Finance | Finance
New research has revealed that millions of Brits are harming their credit scores without even realising it. CredAbility, a free credit score service, found that one common mistake is causing 16 million adults thousands of pounds in higher borrowing costs and leaving them locked out of mortgages, car loans, or mobile phone contracts.
Household debts across the nation are rising, with and increasing number of Brits juggling multiple credit cards. Therefore, experts are urging people to understand how everyday financial choices can significantly impact their credit scores and avoid one mistake that might seem harmless but can cause severe damage.
Aaron Peake, credit score expert at CredAbility, warned: “Millions of people are accidentally making themselves look bad to lenders. Something as simple as taking cash out on a credit card can damage your score, cost you money, and make borrowing harder.
“16 million Brits admit to doing this, not realising it triggers high interest from the day of withdrawal, even on a 0% card. Lenders see it as a red flag, and it can shave up to 95 points off your credit score overnight. That could make a huge difference when applying for a mortgage or personal loan.”
According to the expert, even though you may plan to pay it back quickly, as most people do, the system is designed to penalise cash withdrawals.
He added: “Understanding these little-known rules is key to keeping your score healthy and your borrowing costs low.”
Fortunately, the expert shared five steps to protect your credit score. The first, as mentioned, is to stop taking cash out on credit cards, as “it sends lenders the wrong signals about your borrowing habits”.
The next step is to pay your bills on time, every time. While in the current climate it might be a challenge for some, Mr Peake warns that “missed or late payments are the fastest way to drop your score”. To ensure you pay bills on time, he suggests setting up direct debits or using reminders.
You should also try and keep your credit utilisation low, using less than 30% of your available credit, and avoid closing old credit accounts as this can shorten your track record and cut points off of your score “even if you’re debt-free”.
The final thing is simple – check your credit report regularly.
Mr Peake said: “Mistakes happen. A simple mistake can cost you hundreds or thousands over time. Reviewing your report regularly means you can dispute inaccuracies before they affect your borrowing.”
