Brits in the dark about credit scores: why they are so important
Of those people, 19% have never checked their credit score, 52% have been rejected for a credit card and 34% have been turned down for a personal loan, according to research from credit card provider, Vanquis.
One in 10 said they only realised they had a bad credit score when they got turned down for a mortgage.
The survey of 2,000 people also found that when asked a series of true or false questions relating to credit, 10% incorrectly believe checking your score regularly will affect your rating.
Some also believe that a credit score will be better if you don’t borrow money.
Busting the myths from the facts
The survey revealed that 80% believe that you only have one credit score, when in fact people can have multiple credit scores. There are three major credit bureaus in the UK – Equifax, Experian and TransUnion – and each of these can hold different information about you depending on your financial history.
Other credit score myths include:
- Being on the electoral role doesn’t help your credit rating
- A good credit score is tied to how much money someone has in the bank
- Utility bills and mobile phone contracts do not affect your credit score
- You cannot ask lenders why you were rejected for an application
- Applying for multiple credit in a short space of time will not affect your credit
Why it’s important to know your credit score
A credit score is a number lenders use to help them decide how likely they are to be repaid on time if they give you a loan or credit card. Your individual credit score is based on your credit history.
The higher your score, the greater chance you have of getting better credit deals
If you’re new to borrowing or have had a few late payments, you could find yourself with a less than perfect credit score, making it more difficult to obtain credit in the future.
But there are ways to help improve your score:
- Pay all your bills on time – even being a couple of days late can make a big difference.
- Ensure there are no incorrect details on your credit record – check it regularly and if the details are wrong, correct them. People often move house and change jobs without updating their records.
- Look into specialist credit card providers which can help you build and improve your credit rating – this will help if you have had problems with credit in the past.
- Don’t apply for more than one credit product at a time as each application can have a negative impact on your credit rating. Waiting to hear a response from one provider might seem frustrating but applying for multiple cards could harm your score.
- Close old credit card accounts and cancel old direct debits – they will still show up on your record if you don’t get rid of them.
See YourMoney.com’s 10 ways to boost your credit score for more ways to nudge up those numbers.
Sion O’Connor, of Vanquis, said: “It’s worrying how little understanding people have about credit ratings when they dictate a large part of our lives. Building a good credit rating is important to be able to borrow money for the important things we want in life, such a mortgage or car finance.”