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Taking out a mortgage is one of the biggest financial commitments we can make during our lifetimes. And for many would-be homeowners keeping the cost of this monthly payment down is a key priority.
But now research from TotallyMoney and Moneycomms has revealed that a poor credit score could see this repayment leap in cost by tens of thousands of pounds.
They estimate that in the first five years a £207,000 90 per cent loan-to-value (LTV) mortgage could cost buyers an additional £14,857, while this cost jumps to £78,500 extra over a 25-year term.
Additional figures from the analysis also showed that a poor credit score also had a knock-on effect on other areas of lending that could be factored into a household budget. This includes personal loans; here a £7,500 loan taken over four years could cost an additional £7,453. And when it comes to credit cards, paying a £3,000 credit card bill over a period of two years could cost £1,979 more in interest.
Commenting, Alastair Douglas, CEO of credit experts TotallyMoney, said, “The extra fees people pay for having a bad credit score are huge. Taking the time to check their report means they can understand why this might be happening.
“Lenders review a customer’s credit report when they apply for a product. With a bad score, they’re more likely to charge a higher APR, offer less interest-free months, or even reject an application.
“Being informed about their score can help people to see where to improve and how to get the best deals. A report shows customers up to six years of credit history, and how much credit they are currently using.”
Before adding: ‘At TotallyMoney, we’re on a mission to improve the UK’s credit score. Checking a report is the first step of this process and can help people to understand their score. With this, they can get better rates and more choice — helping them work towards a better financial future.’
Have you given your credit score a recent health check?
FROM: IdealHome, our sister site.