'Credit-score company encouraged me to borrow again when I was nearly debt-free'

A woman with a £10,000 credit card debt told BBC Panorama how a credit-rating service, which she felt would help her keep her finances under control, has compelled her to get more cards. As well as keeping track of her credit score, Experian, a ratings company, bombarded her with emails promoting high-interest credit card offers right before she was close to paying off her debt. Millions of people in the United Kingdom are struggling to keep up with card payments, but consumer advocates argue that providing more credit, even from credit-scoring companies, could make things worse for already vulnerable individuals. Panorama revealed that Experian has been designing a way to identify potentially vulnerable clients and to avoid sending them marketing emails. The woman who spoke to the BBC may have been able to pay off her debt sooner or at a lower price, according to the company's explanation.

According to industry estimates, credit cards have never been more popular in the United Kingdom - about 35 million people in the UK have one. The annual percentage interest rate, or APR, can vary from 0% to more than 60%, depending on fees and charges. However, it is only around 25% for people with an average credit history. Despite the fact that they were struggling financially, Panorama has also spoken to people who say that their lenders encouraged them to take on new debts. Even though he had racked up nearly £7,000 in debt during a manic episode related to bipolar disorder, one man told us how his bank had raised his credit limit. Another man talked about how he's now selling his house after being overwhelmed by credit card debt as work dried up and his marriage broke down. Amanda, the woman with a £10,000 debt, mother of five, and has requested anonymity, went to a debt charity for assistance. Amanda says she was able to get to the bottom of her debt, even though it took years. She had signed up with credit-score provider Experian and, like many others, it was a smart thing to do. It was really useful.I'd like to know the status of my financial affairs on a monthly basis," she says.

Customers are tracked by credit bureaus like Experian, based on data such as their debt levels, the number of credit inquiries, and whether they pay their bills on time. A higher credit score means someone could be eligible for the most competitive interest rates and may find it easier to borrow, but each lender will make the decision about whether or not to offer credit. Experian began delivering more than just monthly credit report updates as Amanda began paying off the last of her credit card bills: Your credit card approval rate has risen, she says. Amanda claims she was sent emails with constant offers for high-interest, so-called credit card credit repairers, which enable customers to raise their credit scores if debts are paid on time. However, these cards have higher interest rates, meaning that those who make only minimum payments are likely to be paying off their debt for a long time. Amanda said,

I assumed I'll just have the one [credit card]; keep it as an emergency.

But, if you miss one, you get more emails to apply for another one, and another one.

What Amanda didn't know was that Experian, the UK's biggest credit-rating company, earned a commission to market credit card lenders' products. More than half of nearly 3,500 low- and medium-income adults who responded to a new study by the Centre for Responsible Credit - a research, policy, and advocacy group, said they had received credit card advertisements from their credit-score providers. Half of those interviewed said they had been given more credit than they could afford, while a quarter had been compelled to take out more credit. Experian told Panorama that it gives its customers

as much detail as possible

in order to help them get credit they can afford. It said that it helps people

understand their choices for moving existing debt to lower or zero interest rates, assisting people in repaying sooner and for less. Experian also stated that it collaborates closely with debt charities, and that

the most important step, rather than your credit score,

the organization says.

Concerns have also been raised over vulnerable borrowers' credit limits being raised without asking. Tom Richardson, an academic who studies debt and mental health, says his own experience made him amazed. He has bipolar disorder, and he walked into his local guitar store about a year ago during what he describes as a severe manic episode. I just came in for a look.I didn't want something in particular,

he says. However, by the time he left the store, he had bought a guitar, a ukulele, and another piece of equipment. He then went online and bought more, putting it all on his credit card. A trumpet, a guitar pedal, tether pedals, 'a guitar amp, , eta, some sort of bongos, and some pads for my computer music gear were among the items

When you're impulsive, it just doesn't feel like real money.

By the time the show ended, he claims he was close to his £7,000 credit limit. He started to pay the balance down and told his bank, Santander, of his medical condition, with support from his family. Santander's credit limit was raised to £9,000 six months ago.

I was trying to do the right thing and minimize the debt,says Tom,and the default reaction was to give me more credit. It was mind-boggling. According to study,

his experience is not unusual. According to a report by debt charity StepChange, four out of ten credit card holders across all lenders were given a limit increase in the last year, with no distinction made between those struggling and those not. When Tom first signed up to his credit card, he opts in to automatic credit card limits, according to Santander. In order to spot any unusual and unaffordable behavior, the bank said it monitors

customer spending closely against previous transactions.

How credit card repayments are structured is another barrier for those trying to get out of debt. According to one 2018 report by the Financial Conduct Authority (FCA), there are 1. About 6 million people each month, only the minimum was paid out each month; typically between 2-5% of their outstanding balances. However, if this minimum payment percentage is lower than the monthly interest rate, the debt will increase even if the card holder stops using their card for spending. This can greatly extend how long a debt will last and how much money is paid. According to Grace Brownfield, an independent debt advice charity, the credit card industry profits from something called "anchoring.

Many consumers will be prompted to choose a minimum payment amount on bills, thereby effectively anchoring what they pay to the desired figure.

There are signs that people are only encouraged to make the minimum repayment even though they could afford more than that.

Brownfield says. People are paying more in interest as a result of this, she claims.

That's where the credit card companies are. Making their money.

Credit cards became a financial lifeline for screenwriter Michael Crompton during years of freelance work, according to screenwriter Mike Cromford. They were left, right, and center he says. I used them as a back-up.He ended up with £21,000 in debt on three cards. He began only paying a minimum amount as his income was depleting, but he wasn't paying off any money. Lenders have consistently raised his credit limits over time. As his marriage came to an end, the debt became overwhelming.

I was paying hundreds of pounds a month and not touching the money,

he says.

It just escalates and escalates. You're sure you're a failure, and you't know who to warn.

The FCA estimates about 2. 8 million people in the United Kingdom are in persistent credit card debt, which is defined as more than 18 months, with more in interest and charges paid than the amount they borrowed. When regulations were introduced requiring lenders to check potential customers' affordability and credit history, the number of individuals has decreased marginally since 2018, according to FCA results. However, critics maintain that the reforms have not been appropriate. Fairer Finance's James Daley says lenders should act sooner if spending patterns indicate a customer is in danger rather than raising credit limits. According to the FCA, its measures on persistent debt and affordability, which were introduced in 2018, now save borrowers £1. 3bn a year.

Lenders should only give credit to people who can afford to pay,

the lender claims. It is currently reviewing the laws and will not hesitate to act if it identifies problems.

Credit-card providers are expected to lending responsibly and

fully comply with tighter legislative guidelines to determine affordability when setting borrowing limits,

says UK Finance, which represents lenders.

Lenders are also helping those at risk of, or experiencing financial difficulties,

the bank added. Tom says he owes about £5,000, while Amanda is trying to keep up with her finances. Michael, a 66-year-old man, is selling his house and pledging to pay off his debt in order to retire debt-free. I know it's my responsibility, he says. "But if you're struggling, the last thing you need is more credit. You need someone to say: 'Stop and get assistance.