An estimated 5.5 million people risked damaging their credit ratings last year by not paying bills such as credit cards on time.
Research by Moneysupermarket.com found that 13% of people skipped a payment last year, with the vast majority failing to pay their credit card bills. And research from MoneyExpert.com found that a massive 6.9 million bills have gone unpaid since June 2007 as result of households feeling increased financial strain.
But both websites warn that a lax attitude to bills could have serious consequences including crippling penalty fees or even a black mark on your credit rating.
Steve Willey, head of credit cards at Moneysupermarket.com, estimates that three million credit card holders have already paid over £35 million in penalty fees because of missed bills. But he adds: “It is the damage to their credit rating that is more costly to them and to the other 2.5 million consumers who have missed payments elsewhere.
"Consumers may feel by missing a payment they’re saving a few pounds but in the long run, missing the occasional payment will affect your credit rating as lenders assess your overall ability to repay on a regular basis.”
Consumers with poor credit ratings may find they are rejected for loans such as mortgages in the future or penalised by being forced to pay a higher rate of interest.
Willey recommends that people who struggle to make their repayments set up Direct Debit in order to protect their credit profile.
Around 10,000 people a month are expected to declare themselves insolvent in 2008, and rising households bills are part of the problem. MoneyExpert.com’s research found 1.39 million people struggled to pay their gas or electricity bills on time in the second half of 2007, and with energy prices set to rise in 2008 it says this problem can only get worse.
Sean Gardner, chief executive of MoneyExpert.com, says: “For some time we have been waiting to see how the financial squeeze would affect the average household. Nearly seven million unpaid household bills is a fairly conclusive sign that we are feeling the effects.
“Missing bills can have serious consequences, whether it’s losing a service altogether or even ending up in court.”
James Ketchell, a spokesman for debt charity the Consumer Credit Counselling Service, says: “We recommend that people who miss or are in danger of missing payments first look at budgeting rather than opting for a debt management solution such as an individual voluntary agreement.”