Credit is easy to obtain, but you have to pay it back!

With reports of snow on the horizon and rising energy prices hitting the press recently, uSwitch estimate that 61% of households are worried about the cost of their energy bills this coming winter.

According to creditaction, more than four in ten adults in Britain struggle each month to make it to ‘payday’. And 41% of consumers feel worse off now, than they did this time last year, according to Gocompare.com

In terms of payment difficulties, the UK Payments Council suggest there are more credit cards in circulation in the UK than people and the average rate of interest is currently around 18.86%, which is 18.36% above the current Bank of England Base Rate! uSwitch estimate that 14 million consumers now use credit cards for day to day spending, whilst confused.com estimate that 26% of credit card holders have been charged at least once in the last year for missing a minimum payment.

If credit cards or other unsecured payments are late or missed, your credit report will be affected and only a limited number of lenders will look to assist when applying for a mortgage, but at a premium interest rate. This extends to insurance and mobile phone providers. You may not even know a default has been registered against you, until you apply for further products.

178,200 mortgages ended Q2 2010 with arrears equivalent to at least 2.5% of the outstanding mortgage balance and 9,400 properties were taken into possession, according to the Council of Mortgage Lenders. The equivalent of 1 property being repossessed every 14 minutes. In comparison, the US amassed a record 102,134 repossessions in September alone.

These are stark figures indeed, but the reality is, if you miss one mortgage payment, or secured loan payment in the last 6 months, your chances of getting a new mortgage are almost zero.

I make no apologies for showing the stark figures above as we move in to the Christmas period. Credit is very easy to obtain, but a) you need to pay it back and b) if you get it wrong, it could affect any future financial applications for a considerable period of time.