- The typical UK credit score is 797.<\/li>
- Accounts with 3 missed payments was up 27%.<\/li>
- A late payment can drop your credit score by 130 points.<\/li>
- It only takes 2 missed payments to turn a \u2018Good\u2019 credit score \u2018Poor\u2019.<\/li>
- 1 million UK credit card accounts had between 1 and 3 missed payments.<\/li><\/ul>
Why your credit profile matters<\/h3>
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\u2019ll offer you credit, how much, and what interest rate they\u2019ll charge you. <\/p>
Your credit profile includes your credit report and credit score<\/a> \u2013 a number that represents your credit history. If you have a great track record of making repayments on time, you\u2019ll typically have a high credit score and lenders will offer you cheaper interest rates. But if you\u2019ve made even one credit card payment late, this turns up in your report and will typically damage your credit score. <\/p>
If you\u2019re 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) \u2013 the companies that hold credit reports. But once the missed payment hits your credit profile, your card provider may raise the interest rate it\u2019s 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.<\/p>
What\u2019s the cost of a late payment?<\/h3>
Credit records are held by 3 main CRAs \u2013 Experian, Equifax and TransUnion. They all have slightly different rating scales. We got our data from Experian, which is the largest of the 3.<\/p>
Experian told us that the average credit score in the UK is 797. This is classed as a \u201cFair\u201d score (not great, but not bad, either).<\/p>
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 \u2013 putting them in the \u201cPoor\u201d credit score category. Similarly, someone with a \u201cGood\u201d credit score who\u2019s late with 2 payments could also end up with a \u201cPoor\u201d score.<\/p>
![\"What](\"https:\/\/www.finder.com\/finder-us\/wp-uploads\/sites\/3\/2023\/05\/1.png\" "\\"Source:")
<\/a>Source: Experian Image: Finder<\/p><\/div>
The exact score drop will depend on several factors, such as whether it\u2019s only one late payment and whether it\u2019s your most recent payment. <\/p>
According to research from global analytics company FICO, the typical credit card balance in the UK carried from month to month is \u00a31,660.<\/p>
We\u2019ve 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.<\/p>
Credit score<\/th> Balance<\/th> Average APR<\/th> Interest charged over a year<\/th><\/tr><\/thead> Poor<\/td> \u00a31,660<\/td> 33.84%<\/td> \u00a3561.74<\/td><\/tr> Fair<\/td> \u00a31,660<\/td> 32.11%<\/td> \u00a3533.03<\/td><\/tr> Good<\/td> \u00a31,660<\/td> 30.29%<\/td> \u00a3502.81<\/td><\/tr><\/tbody><\/table> According to these average figures, you could pay \u00a328.71 a year more in interest if you went from having a fair credit score to a poor one due to a late card payment.<\/p>
Meanwhile, you could pay \u00a358.93 more a year if you were late with 2 or more payments and dropped your score from good to poor.<\/p>
Although these average numbers aren\u2019t huge, they\u2019ll be far greater if you carry a larger balance than \u00a31,660 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 \u2013 like some cards with perks \u2013 as this pushes up the APR. <\/p>
Scenarios: Putting the research into practice<\/h3>
We\u2019ve used 2 example cards to further illustrate what a change in credit score could mean in practice.<\/p>
If you have a poor credit score, you\u2019ll 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.<\/p>
The Capital One Classic credit card, for example, has an initial credit limit of \u00a3200 to \u00a31,500 and people with a poor credit track record can usually qualify for it, as long as they haven\u2019t been declared bankrupt in the previous year. <\/p>
The card charges an APR of 34.9%. If you carried over a balance of \u00a31,660 each month, it would cost you \u00a3579.34 a year in interest. <\/p>
If you have a good credit score, you\u2019re 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 \u00a31,660, you\u2019d pay \u00a3423.30 a year in interest. <\/p>
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 \u00a3156 extra a year in interest payments.<\/p>
Missed and late payments stay on your report for 6 years, although the impact reduces over time if you get back on track.<\/p>
How can I boost my score?<\/h3>
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.<\/p>
![\"What](\"https:\/\/www.finder.com\/finder-us\/wp-uploads\/sites\/3\/2023\/05\/2.png\" "\\"Source:")
<\/a>Source: Experian Image: Finder<\/p><\/div>
For more help, read our guide on 10 ways to improve your credit score<\/a>. You can also check your credit score<\/a> for free via Finder. <\/p>
Experian, Equifax and TransUnion scores<\/h3>
The major credit reference agencies have slightly differing systems, so here are their categories.<\/p>
Agency<\/th> Score<\/th> Rating<\/th><\/tr><\/thead> Experian<\/a><\/th> 0 \u2013 560
561 \u2013 720
721 \u2013 880
881 \u2013 960
961 \u2013 999<\/td>Very poor
Poor
Fair
Good
Excellent<\/td><\/tr>Equifax<\/a><\/th> 0 \u2013 438
439 \u2013 530
531 \u2013 670
671 \u2013 810
811 \u2013 1,000<\/td>Poor
Fair
Good
Very good
Excellent<\/td><\/tr>TransUnion<\/a>
(formerly Callcredit)<\/th>0 \u2013 550
551 \u2013 565
566 \u2013 603
604 \u2013 627
628 \u2013 710<\/td>1: Very poor
2: Poor
3: Fair
4: Good
5: Excellent<\/td><\/tr><\/tbody><\/table>Late payments in the UK: The FICO data<\/h3>
Year-on-year figures in credit card spending and repayments are worrying. <\/p>
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.<\/p>
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.<\/p>
Metric<\/th> Amount<\/th> Month on month change<\/th> Year on year change<\/th><\/tr><\/thead> Average credit card spend<\/td> \u00a3785<\/td> 3.7%<\/td> 11.4%<\/td><\/tr> Average card balance<\/td> \u00a31,660<\/td> 0.6%<\/td> 8.7%<\/td> Accounts with 1 missed payment<\/td> 1.4%<\/td> -15.6%<\/td> 0.7%<\/td><\/tr> Accounts with 2 missed payments<\/td> 0.3%<\/td> -12.6%<\/td> 25.1%<\/td><\/tr> Accounts with 3 missed payments<\/td> 0.2%<\/td> 4.3%<\/td> 27.4%<\/td><\/tbody><\/table> Source: FICO UK Credit Card Market Report, February 2023<\/p>
Bottom line<\/h3>
It\u2019s crucial to be aware of the cost of missing card payments \u2013 not just in late fees and interest, but on your longer term prospects, especially if you\u2019re thinking of applying for a mortgage. <\/p>
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<\/a>. <\/p>
Sources<\/h3>\n
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