Vast majority of Britons in the dark when it comes to credit ratings

3rd August 2015


The majority of the British population is in the dark when it comes to understanding the importance of a credit rating new research claims.

The analysis from Ocean Finance estimates that almost 40m, or 77% of Britons are unsure of what a credit rating even means.

When asked what a credit rating displays, just 23% of people correctly identified that it shows the amount of credit you have; it estimates your ability to repay credit; it helps lenders to decide an interest rate to offer you, and it helps you to identify if you have been a victim of fraud.

Over half of those asked believe that credit ratings are only used to estimate a consumer’s ability to repay credit. Just 2.5% of people knew that checking your credit rating can also help you to identify if you’ve been a victim of fraud.

The research, from the loan, mortgage and credit card provider, also revealed that more than 32m people never check their credit files.

The main reason for half of those people not checking their credit rating is a reluctance to pay for a service such as Experian or Equifax.

Almost 13% of people confessed they had no idea they could check what lenders can see about them, and a further 30% believe that it is pointless to check their credit rating as they cannot change it anyway.

The survey also found that almost nine million people plan to take out credit in the next 12 months but nearly a quarter of those have not checked their credit rating and will instead see if they qualify for credit when they apply. A further 21% of people said they expect to be able to obtain credit, just because they have borrowed previously.

A fifth of those asked do check their credit rating a couple of times each year; 11% check it monthly and just 6% check their file every week.

Gareth Shilton, a spokesman for Ocean, says: “It’s worrying to see how many people do not know what credit ratings are and never check their credit history. Consumers should understand what lenders review and consider when they decide whether to offer credit.

“It’s really important to ensure that your credit history is accurate and up-to-date with your outstanding borrowings registered to your correct name and address. Also, ensure there are no mistakes on your file, such as credit that you haven’t taken out.

“Many people believe you can’t influence your credit rating, which isn’t accurate. If you plan to take out credit in the future, then tidy-up your credit file, get on the electoral roll, and set-up direct directs for your essential bills so you don’t have any missed or late payments.”

One of the myths the study found is that many people believe checking their credit report regularly can damage their credit rating. But checking your own credit file does not leave an imprint and it will help you to spot any irrelevant information and correct it.

“What will damage a credit rating is having an inaccurate file that leads to lenders turning you down for credit,” Shilton added.


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