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:

1. Why we put the clocks back in Autumn – 43%
2. The offside rule – 35%
3. How a rainbow is formed – 31%
4. Pensions – 18%
5. The possible existence of ghosts – 13%
6. Annuities – 12%
7. The Big Bang – 11%
8. The workings of an internal combustion engine – 11%
9. The existence of UFOs – 11%
10. Credit score –11%

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.

Top tips for improving your credit score:

1. Double check you’re on the electoral register. Lenders use the electoral register to confirm an individual’s address and location and fight against identity fraud.
2. Try not to have a high balance on your credit card. Lenders may view this as excessive debt and think you have an inability to repay.
3. Make sure to pay your bills on time, or ahead of time, a good credit score will be built up over time.
4. Do not make multiple applications for credit as this can impact your record negatively.
5. If you notice anything unexpected on your credit report you could be a victim of identity fraud, i.e. someone could have applied for credit in your name, contact the credit reference agency who will try to resolve the issue, alongside the lender.
6. Only apply for credit which is necessary – applying for more than four a year can lower your score.
7. Cancel old credit card agreements and out of date credit cards, such as store cards you no longer use, as this will still show on your file. Lenders will be cautious about the possible size of your debt.
8. If you are divorced or separated, cut all financial ties and make sure your former partner’s details are eliminated from any joint accounts. The credit history of anyone you are financially associated with, such as a joint bank account with a spouse, can affect your credit rating.