Thousands of UK adults are completely perplexed by how credit scores are calculated, actually finding it easier to explain how a rainbow is formed or indeed the offside rule.
According to a new study from Amigo Loans, almost a third (31%) of Brits believe they can confidently explain how a rainbow is formed compared to just one in ten (11%) who could explain how a credit score is calculated.
In fact, it appears that people find it easier to explain why we put the clocks back (43%), the workings of a pension (18%), the possible existence of ghosts (13%) and even the Big Bang Theory (12%).
Things people feel most confident explaining:
In fact a credit score is about as easy to understand as the workings of an internal combustion engine. The research also found that men (13%) are more clued up than women (9%) when it comes to discussing how credit scores are determined.
A credit score is a number that helps lenders decide whether or not to approve a loan, and what types of loans to offer. The score is created by taking your credit history data from a credit reference agency (lenders will use different credit reference agencies) and then added to a set of variables determined by every lender, each completely unique to that lender. For example, a customer may score more points for being age over thirty, than a twenty year old.
Kelly Davies, Chief Communications Officer at Amigo Loans, says: “Credit scores are confusing for people because there isn’t one central source, which means we don’t have one single credit score. This means each credit reference agency could score you differently, meaning some providers will consider you risker than others. This is plain ridiculous. With such a convoluted system, it’s no wonder people find credit scores difficult to understand. The fact is, if people don’t even know what a credit score is, how can we expect them protect it from being inadvertently damaged?
“Once a credit score is damaged, it takes years to repair. And if people need to improve them, it’s better to do it sooner rather than later. An Amigo loan can help build or improve a person’s credit score.’
You can check your credit score for free with TotallyMoney and Clearscore.
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