When it comes to credit scores, myths and misinformation are rampant. For a significant number of people, credit scores remain a mystery. Many don’t check their score regularly, and many others don’t even know just how much of an impact their score can have.
Recent research by credit management company Lowell shows that over 30% of Brits don’t know how to check how well their finances are doing. In fact, the survey, conducted by Censuswide on behalf of Lowell, asked 1001 UK residents how much attention they pay to their credit score – and the results were surprising.
“Your credit score is a key tool, so it’s vital that people know and understand their score, what it says about them and, importantly, the steps they can take to help improve it,” says John Pears, UK CEO of Lowell.
Many Brits don’t really understand how credit scores work
Lowell’s source discovered some deep-rooted myths regarding credit scores. For example, 17% of Brits believe that checking your credit score too often can actually harm your score.
The research also found that a large number of people (21%) believe that income affects your score. A further 6% think that personal loans (from friends and family) are also reflected on the score.
Checking your credit report regularly through one of the three credit reference agencies – Equifax, Experian and TransUnion – is an essential part of understanding how you’re doing financially and whether there are issues you need to deal with.
What can affect your credit score?
Surprisingly, one in 10 people in the survey said they don’t think anything they do has a direct effect on their score. Even scarier, 75% don’t believe phone contracts have an impact on their score. And 66% don’t think car loans affect it either.
Boosting your credit score is an essential step towards getting better loan rates and even qualifying for a mortgage. One of the most important things you can do to have a healthier credit report? Make sure your payments are never late. Still, almost half of Brits don’t think late payments have an effect on their score.
Other things that can have a direct impact on your credit score include:
- Whether you’re registered to vote
- Bankrupcies in the past six years
- How many loans and credit cards you have open
- Past debts
Fixing your credit report and why you should
In order to have a healthy credit report, you first need to spend some time working on fixing errors that could be affecting your overall score.
If you notice mistakes, that’s where you should start. Is a debt you paid off still showing as unpaid? Or is a reported missed payment for a service you’ve already cancelled still there? Disputing these issues with the credit reporting agencies could help your score right away.
Next, take a look at your overall credit utilisation. If you have £20,000 of credit available (through credit cards, for example) and you’re using most of it, this actually lowers your score. Paying off debt will not only better your overall finances but also improve your score.
