The hidden £156 cost of missed card payments

We examine how much missed credit card payments could cost - on top of late fees.

New research by Finder has revealed the costs in higher credit card interest that you face if you miss even one card payment.

Amid the cost of living crisis, increasing numbers of people are missing at least one credit card payment in 2023 vs 2022, according to recent industry data. Our analysis found that 1 million UK credit card accounts in February 2023 had missed between 1 and 3 payments. The figure was up nearly 4%, and the number with 3 missed payments was up 27%.

Missed payments typically lead to penalty fees and interest. But your credit rating can also plunge, putting you at risk of higher interest rates for your card. It affects other borrowing, too – if you’re applying for a mortgage, it could even mean you get rejected.

Key findings

  • The typical UK credit score is 797.
  • Accounts with 3 missed payments was up 27%.
  • A late payment can drop your credit score by 130 points.
  • It only takes 2 missed payments to turn a ‘Good’ credit score ‘Poor’.
  • 1 million UK credit card accounts had between 1 and 3 missed payments.

Why your credit profile matters

Whenever you apply for a credit card, loan or mortgage, providers use your credit profile to assess how reliable you are as a borrower and to decide whether they’ll offer you credit, how much, and what interest rate they’ll charge you.

Your credit profile includes your credit report and credit score – a number that represents your credit history. If you have a great track record of making repayments on time, you’ll typically have a high credit score and lenders will offer you cheaper interest rates. But if you’ve made even one credit card payment late, this turns up in your report and will typically damage your credit score.

If you’re only a few days late to pay, call your card company as soon as possible as it may not yet have reported the missed payment to credit reference agencies (CRAs) – the companies that hold credit reports. But once the missed payment hits your credit profile, your card provider may raise the interest rate it’s charging you, and other lenders may offer you only more expensive rates if you apply for credit. Some might even refuse your application, though that would be more likely with a history of late or missed payments.

What’s the cost of a late payment?

Credit records are held by 3 main CRAs – Experian, Equifax and TransUnion. They all have slightly different rating scales. We got our data from Experian, which is the largest of the 3.

Experian told us that the average credit score in the UK is 797. This is classed as a “Fair” score (not great, but not bad, either).

The company also revealed that making a card payment late can typically wipe 130 points off an Experian score. So someone with an average score would see it drop to 667 – putting them in the “Poor” credit score category. Similarly, someone with a “Good” credit score who’s late with 2 payments could also end up with a “Poor” score.

What can make your credit score drop? Source: Experian

Source: Experian Image: Finder

The exact score drop will depend on several factors, such as whether it’s only one late payment and whether it’s your most recent payment.

According to research from global analytics company FICO, the typical credit card balance in the UK carried from month to month is £1,660.

We’ve crunched the numbers, using average APRs calculated for Jan-March 2023 by Experian, to find out how much more you could be paying, on average, in interest each year on a balance of this size with a poor credit score, vs a fair or good credit score.

Credit scoreBalanceAverage APRInterest charged over a year
Poor£1,66033.84%£561.74
Fair£1,66032.11%£533.03
Good£1,66030.29%£502.81

According to these average figures, you could pay £28.71 a year more in interest if you went from having a fair credit score to a poor one due to a late card payment.

Meanwhile, you could pay £58.93 more a year if you were late with 2 or more payments and dropped your score from good to poor.

Although these average numbers aren’t huge, they’ll be far greater if you carry a larger balance than £1,660 each month. And the average APRs for good scores are affected by the increased numbers of these customers seeking credit cards that come with a fee – like some cards with perks – as this pushes up the APR.

Scenarios: Putting the research into practice

We’ve used 2 example cards to further illustrate what a change in credit score could mean in practice.

If you have a poor credit score, you’ll typically qualify for fewer credit cards. These are most likely to be credit builder cards, which are designed for those with a lower score. These cards tend to come with a lower credit limit and a higher interest rate.

The Capital One Classic credit card, for example, has an initial credit limit of £200 to £1,500 and people with a poor credit track record can usually qualify for it, as long as they haven’t been declared bankrupt in the previous year.

The card charges an APR of 34.9%. If you carried over a balance of £1,660 each month, it would cost you £579.34 a year in interest.

If you have a good credit score, you’re likely to qualify for more cards, including those with rewards such as cashback. The Barclaycard Rewards credit card, for example, offers 0.25% cashback on your spending. This card has an APR of 25.5%, which means on a balance of £1,660, you’d pay £423.30 a year in interest.

If someone with this card was late with 2 payments and ended up on the same rate as that of the Capital One card, this could cost them £156 extra a year in interest payments.

Missed and late payments stay on your report for 6 years, although the impact reduces over time if you get back on track.

How can I boost my score?

The good news is that if you have a poor credit score, there are usually steps you can take to improve it. For example, Experian gave us the examples below.

What can boost your credit score? Source: Experian

Source: Experian Image: Finder

For more help, read our guide on 10 ways to improve your credit score. You can also check your credit score for free via Finder.

Experian, Equifax and TransUnion scores

The major credit reference agencies have slightly differing systems, so here are their categories.

AgencyScoreRating
Experian0 – 560
561 – 720
721 – 880
881 – 960
961 – 999
Very poor
Poor
Fair
Good
Excellent
Equifax0 – 438
439 – 530
531 – 670
671 – 810
811 – 1,000
Poor
Fair
Good
Very good
Excellent
TransUnion
(formerly Callcredit)
0 – 550
551 – 565
566 – 603
604 – 627
628 – 710
1: Very poor
2: Poor
3: Fair
4: Good
5: Excellent

Late payments in the UK: The FICO data

Year-on-year figures in credit card spending and repayments are worrying.

The data analyst FICO says average spending is rising and UK consumers are paying off less of their outstanding balance, showing the squeeze on budgets. And while February saw a drop vs January in people missing 1 or 2 payments, the figures are up year on year.

The table below from FICO, for February 2023, was based on a sample from a platform it owns which is used by 80% of UK card issuers.

MetricAmountMonth on month changeYear on year change
Average credit card spend£7853.7%11.4%
Average card balance£1,660 0.6%8.7%
Accounts with 1 missed payment1.4%-15.6%0.7%
Accounts with 2 missed payments0.3%-12.6%25.1%
Accounts with 3 missed payments0.2% 4.3%27.4%

Source: FICO UK Credit Card Market Report, February 2023

Bottom line

It’s crucial to be aware of the cost of missing card payments – not just in late fees and interest, but on your longer term prospects, especially if you’re thinking of applying for a mortgage.

If you are late making a payment, contact the lender and try to pay it as soon as possible. You can start to rebuild your credit profile if you make the missed payment and keep up with repayments. Find out more about getting your credit score in good shape in our guide.

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