I ended up £30k in debt and nearly went bankrupt after using an app to improve my credit score – traps you must avoid

WHEN mum-of-two Anna James first signed up for a credit checking app, she just wanted to get her finances on track and lift her score.

But eight years later the 32-year-old counsellor from South Wales was nearly £30,000 in debt and on the brink of bankruptcy after taking out credit cards and loans offered when she fell on hard times.

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“I didn’t have a great credit history and I signed up for the ClearScore app to improve it,” Anna* says.

“I wanted better prospects for myself and my children so that hopefully we could have a home of our own one day.

“It started that way, but then it started showing me all these credit cards I could get.”

When she downloaded the app she already had around £1,000 on a Capital One credit card but her score was low due to previous payment problems.

“I knew that to get a better score I had to show I could borrow responsibly and pay it all back each month,” she says.

But fast forward a year, Anna says the app showed her she could transfer the balance to another card with Luma and pay less interest — so she did.

Then when her car needed repairs that she couldn’t afford, the credit-checker showed she could borrow another £950 on an Aqua credit card and £1,000 from MBNA, so she did this too.

Aqua later upped the limit on her existing card to £2,500.

And around this time she took out around £12,000 in car finance outside the app to get a more reliable motor for work.

Then in 2020, the pandemic struck.

“I was juggling studying for my professional qualifications alongside working part-time and then my boyfriend got furloughed from his job. We just couldn’t cover our costs.”

First, she put the weekly shop on one card, and then she used another to fill the car up and then to cover her energy bills.

Before long, almost all her everyday spending was going on the cards.

Soaring energy and grocery costs in 2022 pushed Anna into a debt spiral.

By this time Anna was nearly £20,000 in debt, but the app showed her that she could still borrow more.

So to pay off her credit bills and bring down her monthly payments Anna took out a £5,000 loan from 118 118 Money, then another £5,000 from Lendable, both through the ClearScore app.

“It was just to get us through the cost-of-living crisis, which was making everything so much more expensive.”

She was managing to keep up with her payments but in reality, her finances were balanced on a knife edge.

Soon the interest costs made her debts unaffordable.

“It just ballooned until it was out of control,” she says. “I realized I owed nearly £30,000 and couldn’t keep up with the £500 a month I had to pay just to cover the minimum payments.”

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Last December, Anna agreed with creditors known as an Individual Voluntary Arrangement, as an alternative to bankruptcy.

Now she makes one monthly payment for all her debts and after five years any balance that remains will be wiped.

However, experts warn that these plans are not suitable for many people and you should only ever consider one after seeking independent advice from a debt charity.

Anna says: “The app made it way too easy for me to keep getting credit. I wish it had looked at my situation more thoroughly.”

ClearScore says it is not a lender and does not decide who can borrow money — rather it shows customers what products are available for them based on their score and history.

Lenders carry out their affordability checks before approving borrowers and deciding credit limits, it says.

Joe Wiggins from the finance app adds: “We’re very sorry to hear that one of our customers finds themselves in this position.”

He says ClearScore fully complies with the new rules ensuring companies treat consumers fairly and that it is focused on delivering a positive outcome for users.

Aqua and MBNA both say they are responsible lenders and use affordability checks to make sure that payments are manageable.
MBNA says that because of this it declined an increase to Miss James’ credit when she requested this in 2017.

They urged any customers facing payment difficulties to get in touch.

Neither 118 118 Money nor Lendable responded.

Capital One, which also owns Luma, did not comment.

*Anna’s name and profession have been changed

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How the agencies work

THREE main credit agencies hold a huge amount of information on your financial affairs, even if you don’t sign up as a customer with them.

Between them, Experian, TransUnion, and Equifax know who you bank with, how much debt you have, and whether you’ve missed payments on household bills.

The firms collect this data from banks and other providers – you often give consent for this when applying for products, by accepting terms and conditions.

To get the best picture of your finances, check the info held by all three agencies.

You can request a free copy of your “statutory” credit report online or by post from any of these companies.

If you want a report immediately, to get more detailed info or see how likely lenders are to approve you, you can often access this for free too.

Experian has its service for this called Credit Expert, but for TransUnion, you will need to sign up with a separate company – either Credit Karma or Totally Money – if you don’t want to pay a fee.

For Equifax, you need to sign up to ClearScore.

When you sign up for these services you will be asked if you want to see “personalized offers” – which means you’ll be shown deals from different lenders.

In some cases, the service works closely with the lender, which means they can tell you that you’re “100 percent” likely to qualify for a loan or card.

This can be useful as it prevents you from being rejected on applications, which can damage your score.

However, experts have warned that these offers could tempt people to borrow money who weren’t looking for a loan.