One in six people fail to pay bills
One in six people failed to pay at least one bill last year, with around four million missing credit card payments - a mistake that can seriously damage your credit ratings.
According to a survey by moneysupermarket.com, over eight million people missed regular monthly bills in 2010, putting their credit scores at risk. In addition, around 1.5 million people missed payments for either a electricity, council tax or mobile phone bill in the last 12 months.
Londoners were topping the list of being most likely to miss a payment with 11% forgetting to pay credit card bills, compared with just 2% in Northern Ireland.
By missing payments you're at risk from late payment fees or losing promotional discounts, which could see the end to low interest rates or 0% balance and purchase periods.
For more read: Why it pays not to ignore your mail
Although most utility bills will not change your credit score, those for mobile phone and broadband will and defaulting on these payments could eventually lead to a black mark for any future credit.
Kevin Mountford, head of banking at moneysupermarket.com, says:
"There is a huge section of the UK population seriously damaging their credit profiles by missing payments and the consequences can be far reaching for your credit rating and have a knock-on effect when applying for a new card, mortgage or securing credit of any kind.
"Although many people know about the importance of repaying credit cards or loans, many don't realise that their mobile phone contract will also show up so it is important to keep up with these repayments," he adds.
If you're worried that you might have bad credit score because of a missed payment you can check your credit score online at Equifax, Experian and Callcredit. By law all credit agencies have to provide a one off copy of your credit record for £2.
If you struggle to pay your bills on time because money is tight, changing to cheaper products and services can help you free up more spare cash.
Your credit score is a three-digit number (ranging from a low of 300 to a high of 850) calculated from the information in your credit report. Your credit score enables lenders to determine how much of a credit risk you are. Basically, a low credit score indicates you present a higher risk of defaulting on your debt obligations than someone with a high score. If you have a low credit score, any products you successfully apply for will carry a higher rate of interest commensurate with this risk.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.