Put the following crimes and misdemeanours in order of severity: violent disorder, possessing a firearm, rape, child abduction, or being three months late with your water bill. I think we’d all agree to put the water bill last. Yet the punishment meted out to late payers can, remarkably, be worse than for all the other crimes I listed.
You might be thinking this can’t possibly be true. But in November the Guardian reported how Greater Manchester police gave “slap on the wrist” cautions for rapes as well as multiple other serious crimes. A caution means the offender does not go to court and does not get a criminal record. While the caution will remain on your record for the purposes of DBS checks for six years, when it comes to things like applying for a job it is “spent” (ie, does not have to be disclosed) within three months.
Now let’s compare this with a late water bill. I was contacted by a reader (she asked to remain anonymous, so let’s call her Diana) who was late with her Southern Water bill during the period she was selling her house. She claims the amount overdue was £64; it said it was £143. Diana also alleges that Southern reported her to Experian the day before the sale completed. Whatever the rights and wrongs of the bill itself, the outcome was that Diana now has a default notice attached to her account at the credit rating agencies. But don’t for a moment think that a default notice is just a little blot – it is quite extraordinary how damaging it can be in so many areas of your life.
In Diana’s case, her credit rating at Experian instantly fell hundreds of points. Experian won’t say exactly what it was before, but confimed to me that it fell “a couple of hundred points” to 673 once the Southern Water default was applied. To put that in context, 999 is the best score anyone can get, while 673 “is in the middle of the poor category”, Experian says. This is how Diana is now rated, even though she tells me she actually has savings rather than debts.
Luckily she is a pensioner and won’t need to take out a mortgage again. But if she were a younger person the default notice would in effect bar her from taking out an affordable mortgage for six years. She would be thrown into the hands of sub-prime lenders who would charge her a fortune to borrow.
If she wanted to, say, buy a car with a personal loan, she’d also be frozen out. If you want to borrow £10,000 over 60 months and have a “good” credit rating, the best deal at the moment is TSB at 2.9%. Diana would only pay back £10,744 in total. But now she has a “poor” credit rating, the best deal she would be offered, according to data provider Moneyfacts, is from Everyday Loans at a rate of 34.4%. The repayment would total £19,387. In other words, because of that £64 (or £143) water bill, she would be punished with a £9,000 extra cost when buying a car.
Strikingly, Experian told me that a default on your credit record is treated similarly to a county court judgment. In effect, private companies can post information on to a private (profit-seeking) database that has the equivalent impact of a court procedure. What’s more, a default “conviction” won’t be spent in three months – it will sit there for six years.