Does gambling affect your credit score?

By Sasha Yanshin | Published on 14 November 2019

Gambling remains popular across the United Kingdom and you might not think twice about betting on your favourite team or taking a punt on a horse race. It is important to know, however, that gambling can affect your credit score which can have financial implications for you.

Gambling affects your credit score if you use a credit card to make gambling transactions. These transactions will be classified as cash withdrawals and this information will be submitted to credit reference agencies, affecting your credit profile.

To find out specifically how gambling can affect your credit score and what you can do to avoid the risk, read our guide below.

How gambling can affect your credit score

If you gamble online or in a shop and make payments with a credit card or even a debit card that is linked to an account with an overdraft, you might find that your flutter can affect your credit report.

Specific information about the gambling will not be available to prospective lenders, except in cases where they request statements =- for example if you apply for a mortgage.

However, gambling transactions on credit products are classified as a special type of cash withdrawal by card companies and information about the number and size of cash withdrawals is submitted to credit reference agencies on a monthly basis.

While cash transactions in their own right are a big risk factor and will impact your credit score in their own right, credit card companies are becoming smarter in their analysis of credit bureau data.

If they see a small number of cash withdrawals for a large total amount of cash, or a large number of withdrawals for a small total amount, these will immediately look like gambling. How many cash machines do you know that will give you £2.50 on request?

As gambling is seen as a very high risk activity by credit providers, having gambling payments come through on your cards can affect your credit score and continue to affect it for months to come.

Why are gambling transactions seen as high risk?

Gambling transactions and cash withdrawals in general are seen as high risk for two main reasons by providers of credit.

The first is the obvious one - gambling is seen as an irresponsible way to spend money. For a borrower, the situation looks like you've had to borrow from them and then go straight to the casino with the money they have lent you to stick it all on red.

You can see why a lender might not want to lend money to somebody they think is likely to gamble it away or , worse, have a gambling addiction.

The second is more of a technical element. As gambling transactions are classified as cash withdrawals, credit card companies don't like cash transactions either as these are often indicators of higher customer risk.

Low risk customers use their credit cards to make regular bill payments, purchases in shops and other everyday spend. The moment a customer sticks their card into a cash machine and withdraws £200, the credit card company has no way of knowing what that money is for.

There might be a perfectly good reason for withdrawing cash - you might want to stick £20 notes into Christmas gifts for the grand-kids. Too often though, cash is used for shady transactions on the street which make the customer a lot more risky in the eyes of the lender.

Impact of gambling on a mortgage application

A gambler risks losing their house in a game of poker - how gambling can affect your credit score
Luis Louro/Shutterstock.com

While this is a complex issue with a lot of caveats and details you need to know, gambling can have a severe impact on your credit score as far as your prospective mortgage company is concerned.

As every company calculates their own credit scores using all the data available to them, mortgage companies may not take kindly to seeing gambling transactions printed on your statements.

Unlike credit card or loan companies, mortgage providers will frequently request several months' worth of statements and soon will ask for an online link to your bank account where they will see your history going back years.

Their credit policies are much more strict and if you have any significant amount of gambling in your statements, this can be the difference between being accepted for the mortgage or getting declined.

Indirect ways in which gambling can affect your credit score

Gambling can affect your credit score in a lot more ways than just the type of transaction that gets recorded and reported to the credit reference agency.

The obvious issue is that if you gamble and lose money, you might find it harder to make your credit repayments and fall into arrears with your debt. This can quickly spiral out of control and before you know it, the amount owed with all the accrued interest, penalty charges and accumulated monthly payments can feel like a real mountain to climb.

Then there's the less direct ways in which gambling can also take a toll on your financial health.

As gambling will come through as a cash transaction, interest will be considerably higher than regular purchases. On many credit cards cash transactions will incur interest rates of 29.9% or higher which can be double what you'd be paying on the rest of the balance.

Note that this interest gets charged immediately from the day you make the transaction even if you repay your credit card balance in full every month. Oh, and you get a Cash Advance Fee added to your account - usually 3% of the amount or £3 whichever is higher.

Your monthly repayments on the credit card will increase as a result and you might find yourself with a lot less disposable income than you thought which may lead to your debt growing or even missing some of your repayments.

I know it might seem like you're only having a bit of fun, but the repercussions of this can last for a long time and affect your family. Remember that all of your financial data will affect the credit score of anybody who is financially linked to you - your spouse for example.

What you can do to avoid hitting your credit score through gambling

If you want to make that bet or put some money on the Grand National anyway, there are ways you can do it without affecting your credit score.

The easiest way is to pay for your gambling in cash. Just make sure you don't use your credit card to withdraw the cash in the first place!

Paying in cash will have no impact on your credit score whatsoever, although the cash itself is most definitely at risk.

If you're gambling online, whether that's through online betting, online card rooms or an innocuous game of online bingo (yes - online bingo is also gambling!), paying in cash is not an option.

You'll have to use a card and the best thing to do is to pay with a prepaid card or a debit card linked to a basic current account that has no overdraft facility.

As these are not credit products, they do not report data to the credit reference agencies and even if they were to, debit products do not have the same balance classifications as credit cards and your cash withdrawals will not come through in the same way.

This means if you use one of these cards to load the money into your online gambling account, there will not be a direct impact on your credit score, although a lot of the indirect impacts we mentioned above still apply.