How does a bad credit rating affect you
Is Your Credit Score Really That Important When You're Struggling Financially?
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"But how will this affect my credit rating if I default?" This is a common question many people ask when they need to confront their debt situation. You need to ask yourself, "If I'm worried about my credit rating or credit score, am I truly struggling with my debt?"
It's an uncomfortable question. But it's one that must be asked, because a fixation on credit scores is actively harming people across the UK. A major study by the Centre for Responsible Credit found that 6.4 million low-to-middle income adults are cutting back on essentials like food and heating specifically to preserve their credit scores. Three-quarters of borrowers in financial difficulty said they would not seek help from their lender because they feared it would damage their score. That fear keeps people trapped in a cycle of debt.
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"I Want More Debt" — What Protecting Your Credit Score Really Means
Let's step back for a moment. When someone struggling to manage their debts prioritises maintaining a high credit score, what they are technically saying is:
"I'm struggling with my current debts, but I still want the ability to get into more debt."
Read that again. That's what clinging to a credit score is truly about — the ability to borrow more. That's a risky mindset when you're already drowning.
Taking action to address debt doesn't always come without its disadvantages; however, it is a very small price to pay to regain control of your life — a life that may be spiralling out of control. The emotional and mental stress of debt has a far greater impact on a person than merely rebuilding a credit score.
Debt and Mental Health: The Numbers Don't Lie
The data here is striking. Research by the Money Advice Trust shows that people behind on household bills are over twice as likely to report very poor mental health—16% versus 6% among those not behind on bills. Nearly a third (31%) of people who faced debt problems in the past three years said their mental health worsened directly because of it.
It gets worse. Research by Christians Against Poverty shows that nearly 28% of UK adults, over 15 million people, experience daily anxiety about money. CAP also reports that most of their clients had thought about ending their lives before seeking assistance. Those facing problem debt are more than twice as likely to have mental health issues (39%) compared to those without debt (18.4%).
These are not merely statistics; they are real people, in genuine pain, often because they prioritise their credit score over their own well-being.
Why a Default Can Be a Lesson, Not Just a Setback
Having a default or other negative mark on your credit report can temporarily affect your ability to get credit. This doesn't mean you can't borrow at all; rather, your options will be restricted, and borrowing might become more expensive.
What you should take from this situation is a lesson. It's an opportunity to learn from past mistakes, understand the risks of borrowing or using credit facilities, and master managing your financial life without relying on credit as a crutch.
Once you've achieved this, you can focus on building your credit score and using credit to generate income, such as obtaining a mortgage to buy a property. This process of learning and growth puts you in control of your financial future.
It would be wise to learn more about debt and borrowing. There are several articles at the bottom of the page that can assist you. You can also visit our Financial Education section to expand your knowledge.
Should You Worry About Your Credit Score When You're in Debt?
If you are struggling financially to the extent that the situation is taking over your life, the last thing you should focus on is retaining the ability to worsen your situation (such as the ability to borrow).
In short, your credit rating is unimportant when your mental well-being is affected. Your aim should be to find a way out of your situation with the least negative impact on your life.
Here's some perspective. About 9.2 million UK adults are currently dealing with unmanageable debt, and millions more struggle to cover essential living costs, so you're not alone. The typical UK household has around £66,000 in total debt, mostly due to mortgages. Households with negative budgets—those unable to meet basic expenses—have seen their debt levels increase significantly in recent years, with average debts nearing £10,000 per household. These are people who cannot afford to eat properly, let alone worry about a three-digit number on a screen.
If this resonates with you, take a look at our 'I need help with debt' section, where options are outlined alongside their advantages and disadvantages. TRDG’s got you covered.
The Credit Score Trap: How the Industry Keeps You Borrowing
There's something else worth understanding. The credit score industry itself is not always acting in your best interest. Research from the Centre for Responsible Credit, titled Good Score, Empty Cupboard, found that credit score apps and dashboards may encourage financially vulnerable borrowers to focus on maintaining their score — sometimes at the expense of their basic needs.
Their research, based on a survey of around 3,400 low-to-middle income adults, found that credit score messaging creates what they call a ‘disciplinary effect’; approximately a third of borrowers reported cutting back on essentials specifically to keep their score looking good. Among those who check their score more than once a week, that figure rises to 52%. The report concludes that the UK credit reporting system often prioritises lender interests over borrower wellbeing and argues that reform is needed.
So, next time you're worried about your credit score, keep in mind that this anxiety might not always reflect your financial reality.
Remember to read The Real Debt Guy's final thoughts below!
The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.
