Debt has two reputations: the adverts sell it as harmless ("spread the cost!"), and the shame-culture treats all of it as failure. Both are wrong. Borrowing is a tool — a mortgage is debt, and so is a payday loan — and fluency means knowing which is which and what it truly costs.

Your credit report: the rental history of money

Three agencies — Experian, Equifax and TransUnion — keep files on how you've handled credit: accounts held, payments made or missed, how much of your available credit you use, and public records like the electoral roll. Lenders read these files to decide whether to lend to you and at what price. You can check all three for free, and you should — errors are common enough to matter and fixable.

Now the myths, because credit scoring attracts them like nothing else:

  • "Checking my score lowers it." No. Checking your own report is a "soft search" and harms nothing. Hard searches — actual credit applications — leave a footprint, which is why scattergun applying is unwise.
  • "There's one official score." There isn't. Each agency has its own number, and lenders score you with their own models anyway. The number is a rough health gauge, not a verdict.
  • "You need debt to have a good score." Half-true, annoyingly: you need a track record, which means using credit and repaying it flawlessly — not carrying balances. A credit card used for the weekly shop and cleared in full every month builds history and costs nothing in interest.
  • "Student loans hurt your credit score." They don't appear on credit reports at all (though lenders consider the repayments when assessing mortgage affordability).

APR: the price tag on rented money

Remember AER's evil twin from lesson two? APR tells you the true yearly cost of borrowing. The scale is the education: a good mortgage might be low single digits, personal loans mid-to-high single digits, credit cards often 20–30%, overdrafts around 40%, and the legal high-cost lenders reach into the hundreds and beyond. Same rented pounds, wildly different rent. Before any borrowing, the fluent question isn't "can I afford the monthly payment?" — it's "what is the total this will cost me, and is the thing worth that?"

The minimum payment trap

Credit card minimum payments are engineered to feel responsible while barely denting the balance — typically a small percentage that shrinks as the balance shrinks, stretching repayment across years or decades and maximising the interest you pay. Paying even a fixed £10–£20 above the minimum, every month without fail, collapses the timeline dramatically. If you carry card debt, this single habit is worth more than everything else in Money School combined.

Good debt, bad debt, and the honest test

Forget the labels; use the test. Borrowing is defensible when it buys something that outlasts the debt or increases your earning power, at a rate you've compared, with payments that survive a bad month. It's dangerous when it funds routine living costs, when it's the third balance shuffled onto a fourth card, or when the honest answer to "how will this be repaid?" is a shrug. And if debt has already become a weight rather than a tool: free, judgement-free help exists — StepChange and Citizens Advice untangle situations far messier than yours every single day.