Half of people in the UK have never checked their credit score, according to research from RateSetter, with 53% doing something which may actually harm their credit score – potentially making it difficult or impossible for them to borrow money in the future.
In addition, three in ten (30%) people are worried about their creditworthiness and a similar number (32%) intend to take action to improve their credit score within the next 12 months.
Credit scores help lenders decide whether to lend money, how much to lend and how much interest to charge. By not knowing their credit score, people risk paying more interest when they take out a loan and may face limits on the amount they can borrow. In extreme circumstances, they may find themselves “locked out” of credit.
While eight in ten people (83%) know what a credit score is, half (50%) do not know their personal credit score and had never checked it. A further quarter (25%) say that they did not know their current score but had checked it in the past. Just one in five (20%) know their score exactly or approximately.
More than half of respondents (53%) are doing things which may harm their credit scores. For example:
Many other respondents were also doing things which may prevent them from building up a good credit history: for example, one in ten (11%) have never taken on any debt, which can result in what’s called a “thin file”, where underwriters do not have access to enough information to assess someone for creditworthiness due to a lack of borrowing history.
“Credit scoring is an imperfect science” commented Jay Magee, head of retail underwriting at RateSetter, “but it is a really important part of the decision of whether to give someone a loan. By checking your credit score, which the likes of ClearScore, Equifax and Call Credit allow you to do for free, and taking a few easy steps such as getting on the electoral register, you can really improve your score and with it, your chances of borrowing more cheaply.”
Jay added “Some people think that by never getting into debt, they will automatically be seen as creditworthy. But in reality, it’s by borrowing and paying back on time that you can build up a good score. Our list of the seven deadly credit scoring sins is a mini-guide to help people improve their scores.”
Seven deadly credit scoring sins
RateSetter has published a free guide designed to help people to improve their credit score, which is available at www.ratesetter.com/blog/article/know-your-credit-score.
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