The shocking barrier to getting the best energy deal
Around 5.9 million people in the UK are on a pre-payment energy meter, which means they need to top up in advance before they are allowed to access gas or electricity. It's one of the most expensive ways to pay for your gas or electricity, but ironically it is usually the way that utility companies will supply some of the people struggling most with costs.
Meanwhile, millions more are forced to pay for their energy through monthly bills, because their energy company has refused to set up a direct debit agreement.
For both groups of people, their credit record is getting in the way of the best deals.
Pre-payment metersPre-payment meters offer a terrible deal for householders. Nowadays some energy companies say that they don't charge any more for pre-payment meters - however, that's compared to their standard rate, which is the worst tariff they offer. The average cost for the gas and electricity on a meter is far higher than for a typical customer, because the best deals on the market tend to be reserved for those people who pay on time every month by direct debit and access online tariffs.
It's also incredibly inconvenient. There are a few different models taking either smart cards, keys or coins. Those with a meter that takes coins can easily run out of cash and find themselves cut off. Meanwhile those who need to top up their smart card or key at a shop or post office may not get around to it before running out of energy.
Very few people actively seek a pre-payment meter - except some landlords who don't want the worry of tenants running up energy debts at the address.
Instead, in many cases, utility companies will have insisted on installing a pre-payment meter after the household has had difficulties in paying bills in the past. Those who have run up major debts to the energy companies will sometimes be switched to a meter, so they can pay-as-they-go for their energy - while at the same time they pay off their debt in regular instalments.
In theory you can switch to a standard meter. Some energy companies will charge you to switch. So, for example, Scottish Power charges £62.90 for gas and £45.91 for electricity, while SSE charges £52 for each. However, some are free, so if you are with British Gas, EDF and eon you can switch for nothing.
However, most will check your finances to satisfy themselves that you will be a responsible bill-payer. Most will review your account history to ensure you haven't been in debt to an energy company for the past 12 months. Many will do a credit check.
Direct debitIn theory switching from paying for your energy through monthly bills to direct debit is far simpler. In many cases you simply have to call your supplier and they will change your details so you can access the savings.
However, in many cases nowadays before they do this, they will perform a credit check. The good news is that the companies will not be as demanding as many other lenders when they are assessing you for direct debit. However, if you have had serious problems in the past, you could find yourself stuck on the higher tariff.
Get a better dealThe first step to getting a better deal in both cases may mean checking your credit record, from a company like Experian. This will show you all the things your energy supplier will see when they check your credit record - including all your borrowing and repayments, how good you have been about paying bills in the past, and just how much debt you have at the moment.
There are ten things to check on your report, which will indicate the changes you need to make in order to improve your chances of being accepted for a better deal.
1. Are you on the electoral roll?
This is how credit ratings agencies confirm your permanent address, so you need to be on the roll as a minimum.
2. Are any of your bills showing as being paid late?
The energy companies will pay close attention to this and will be concerned even if you pay a couple of days late. The good news is that your most recent behaviour will hold the most sway, and as soon as you have built up a good record for three months, they will start to see you in a more favourable light.
3. Have you missed debt repayments?
This can be a major concern for anyone checking your record - particularly if it's a regular occurrence. Full details of all your payments for the last 12 months will appear on your record - and details of how often you have been late in the last six years. Again companies will be most interested in your most recent history, so you can turn this around by making sure you pay on time from now on.
4. Do you have lots of debt?
Companies don't like to see that people have borrowed enormous sums - especially if they also see you are only making the minimum repayments in many cases. If you have a huge burden of debt, you need to seriously re-think your finances so you can start to pay it down.
5. Are you borrowed up to the max?
Companies are concerned not just with your total amount of debt, but also how much of your available credit you have used. If you have borrowed more than 75% of the total available to you, you need to prioritise paying this down.
6. Do you have lots of credit cards you don't use?
On the flip side, companies will also look at how much potential credit you have access to. If you have lots of unused credit cards, they will see this as a potential liability, so close down any you no longer use.
7. Have you made lots of applications for credit recently?
Each application will leave a footprint on your credit record, and too many of these will look as if you are in financial trouble. Make sure you leave as long as possible between applications.
8. Are you still linked with an ex?
If you have previously had a financial product with an ex, your report may show you are still linked, so any problems they have may be holding you back. If you are still showing as having a link, get in touch with Experian and arrange for the connection to be severed.
9. Is there a mistake on your report?
This can happen, so if you can see something is not right, contact Experian and they will work with the company who made the mistake in order to correct it.
10. have you been the victim of fraud?
In some cases, it's not you that has been damaging your credit record but someone using your name. If there's anything you do not recognise on your report, contact Experian's fraud team, and they will launch an investigation, and clear fraud from your record.