IOU Ostriches: half of Britons may have damaged their credit score

27th February 2015

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Half of Britons may have ruined their credit history without realising as a nation of ‘IOU Ostriches’ fails to keep on top of their borrowing record.

 

A total of 47% of people believe they have a strong credit history but are burying their heads in the sand when it comes to understanding the reality of their report, shows research by Experian.

 

Seven out of 10 people believe they have a good or excellent credit history but of these two thirds have never actually checked their score and many are managing their credit in a way that is damaging their credit rating.

 

A fifth of people polled said they were planning on buying a new home in the next 18 months but Experian said a poor credit history could miss out on the best mortgage rates or be denied a mortgage at all.

 

There are a number of ways people can ruin their credit history:

Ever-increasing levels of borrowing

 

More than a quarter (27%) owe more than they did this time last year and only 16% have made significant reduction in borrowing. Lenders look at whether borrowing is increasing over decreasing and are less likely to provide more credit to those taking on more than they can afford.

Newly-opened credit accounts

 

A fifth of those surveyed have taken out new credit or a store card in the last six months and while taking on credit can strengthen a credit score over the long term, in the short term it will lower as lenders assess how well it is being managed.

Repaying the bare minimum

 

One in 10 people only make the minimum repayment on their cards each month. This not only increases the amount they will pay back overall, lenders will take this as a sign that an individual is struggling to meet their credit repayments.

 

Julie Doleman, managing director of Experian Consumer in the UK, said: ‘Understanding how to properly manage your credit accounts and knowing what lenders look for when reviewing a credit application is the key to building an excellent credit score.’

 

 

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