Don’t cut up all your credit cards

This week is likely to see many consumers receive their credit card bills covering the bulk of their Christmas spending. And, for some, the hangover of Christmas past could prompt them to consider cutting up their cards to force a cut back on spending in the future. But leading instant online credit information provider, Equifax, is warning consumers struggling with their finances to make sure they don’t cut off all their options.

“A natural instinct when getting to the point of facing too much debt, especially on credit cards after the Christmas spending spree, is to cut them up” confirmed Neil Munroe, External Affairs Director, Equifax. “But whilst it’s important to stop using credit when you’re already struggling to manage repayments, we do advise that consumers don’t cut up all their cards.

“Obviously it’s important to try to get financial matters straight first. But once they have achieved this they may want to use credit in a responsible way to support their finances in the future. If they have had a record of debts and defaults then they will find that new applications may not be accepted, especially as lenders are now operating much tighter criteria when assessing new customer applications.

“Indeed, in a recent survey* conducted amongst customers of our Credit Reports and Ratings, nearly a third of respondents said they had been refused credit in the last 6 -9 months. 26% thought the reason they were refused was because they had a poor credit rating with 10% saying they thought they didn’t fit the lending criteria. So our advice is to stop using credit cards and do everything possible to pay off outstanding balances. But don’t cut them all up.

With new credit proving harder to find at the moment as banks, credit card providers and other lenders continuing to maintain strict lending criteria, Equifax is urging consumers to tackle money worries instead of burying their head in the sand.

“Credit cards are a costly way to pay for essentials if the bill isn’t paid off in full at the end of each month” warned Neil Munroe. ”But we do acknowledge that having access to credit could be useful in the future and that’s why we are advising that consumers don’t cut up all their cards.

“It’s also crucial not to forget any cards on which there are outstanding balances – any overdue payments will be shown on an individual’s credit file and will be taken into account by lenders when new applications are made. It’s worth consumers getting a copy of their latest credit report to make sure no cards are forgotten. To make this as easy as possible, we have launched a new service which gives them access to their Equifax Credit Report for 30 days for free.”

The new Equifax Credit Report, with the facility to access credit information for the first 30 days free, is accessible simply by logging onto equifax.co.uk. Designed to help individuals understand their credit file and see what lenders see to assess new credit applications, the Equifax Credit Report also includes expert tips and advice to help consumers take the right steps to manage their finances and navigate through life’s challenges.

If the customer does not cancel before the end of the 30 Day Free Trial, the service will continue at £6.99 per month, giving them unlimited online access to their credit information and weekly alerts on any changes to their credit file. It also includes an online dispute facility to help them correct any errors on their credit file simply and quickly.