Brits put their credit at risk

13 Dec 2017  Thousands of UK adults have no idea that they are credit checked for financial products, from utility bills, mortgage applications and credit cards, according to a new study from Amigo Loans.

The research found that more than 51% of UK adults have never checked their credit score, meaning that thousands could be in for a nasty shock if they are declined when applying for financial products. Utility bills including electricity (63%) and gas (62%) and mobile phone contracts (37%) were amongst the everyday financial products that individuals didn’t realise could impact on their credit.

Almost a quarter of consumers also didn’t know they would be credit checked when applying for a credit card meaning they are potentially hindering their chances of getting one. When you are credit checked and declined it can actually damage your credit score further. This means unknowingly, many Brits could be making future applications ever harder. The numbers are even higher amongst 18-24 year olds with 42% failing to realise that an application for a credit card can impact their credit score if they are refused.

With property rentals on the rise, it’s concerning that 60% of adults didn’t know that in order to rent the property their credit could be checked first. And nearly a quarter of UK adults also hadn’t realised their credit would be checked when applying for a mortgage.

Lenders and banks use your credit score to judge how trustworthy you are and the level of risk involved in lending to you. Damaging it could severely impact an individual’s ability to be able to borrow from a lender, especially a mortgage or a loan.

Kelly Davies, Chief Communications Officer at Amigo Loans, which commissioned the study said: “Credit checking, credit scoring and pretty much the whole ‘credit history’ system is more mysterious than the Bermuda triangle for most of us Brits. It’s so clandestine and it needs to change because not knowing can really mess up a person’s chances of borrowing. The whole system needs reviewing; I’m not a fan of credit scoring because it can alienate people unfairly.”

There are a number of credit reference agencies available which allow people to check their score before applying for credit including EquifaxExperian and TotallyMoney

Top things people DIDN’T know you were credit checked for:

  1. Electricity direct debit payment – 63%
  2. Gas direct debit payment – 62%
  3. Property rental – 60%
  4. Retail finance – 51%
  5. Overdraft extension – 50%
  6. Store cards – 47%
  7. Car finance – 38%
  8. Mobile phone monthly contract – 37%
  9. Personal loan – 26%
  10. Mortgage application –24%
  11. Credit card –23%

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.
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