Each year a substantial number of families use credit to make up for the extra Christmas spending. One in six families borrow nearly £700 (£685) each year to help cover festive expenses, with credit cards typically used to spread the cost of repayments across six months for average income earners³.

The average British family spends £35,000¹ on Christmas across their lifetime, racking up £2,494 in interest alone, according to an analysis from ClearScore and economists, Cebr. This makes the lifetime cost of Christmas far higher than the average British annual salary of £28,000².

However, Christmas ends up considerably more expensive for some: those borrowing £685 each year with a poor credit score could pay £3,259 in interest on top of their original debt across their lifetimes, whereas an excellent score reduces the interest paid by 46% to £1,766⁴. This is because the best rates on credit cards are reserved by lenders for those that are seen as lower risk due to their higher credit scores.

Justin Basini, CEO and founder of ClearScore said, “Across our lifetimes we devote more than an entire year’s salary to the cost of Christmas. Inevitably, most of us use credit to help fund the festive period, so it’s important to keep your credit score high to avoid paying over the odds.”

Recent data from the Bank of England show that UK households are borrowing at the fastest rate since the summer of 2015, making it more important than ever to access credit at the cheapest possible rate. Outstanding consumer credit, which includes loans on credit cards as well as other advances and loans but not student loans, has surpassed £190 billion in October, a level last seen just before the financial crisis dried up credit markets in December 20085.

Kay Neufeld, Economist at Cebr, said, “The results of this analysis suggest that households should be aware of their credit score as well as their repayment plan for any outstanding loans. Household debt levels in the UK are rising quickly, fuelled by low interest rates and high consumer confidence. But the UK economy faces a challenging outlook for 2017 and past experiences have shown that economic shocks and rising unemployment can quickly lead to repayment issues or even defaults. If families decide to finance their Christmas spending through credit, they should make sure to get the lowest possible interest rate and pay off the loan as quickly as possible to keep interest payments low.”