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First-time Buyers

Brits remain baffled by credit scores

Adam Williams
Written By:
Posted:
27/02/2015
Updated:
26/02/2015

Credit scores are still not understood, despite their importance to the mortgage and financial process, a leading firm in the sector has warned.

Many banks and building societies use credit scoring to determine whether to grant a mortgage or other loan and borrowers could be inadvertently harming their chances.

Research by Experian found while 71% of Brits said they thought they had a good credit score, two-thirds of these people had never checked properly.

The firm said many of these people had either increasing levels of borrowing, newly-opened credit accounts or were repaying the bare minimum on existing loans.

A fifth (21%) said they were planning to buy a new home in the next 18 months, but the firm warned such behaviour could mean missing out on favourable rates or being declined for their loan.

Around 15% of those surveyed didn’t know that missed payments can damage their credit score while 44% were unaware that making multiple credit applications in a short period can harm their credit score.

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A quarter (24%) also wrongly assumed that having a good salary would result in a good credit score.

Julie Doleman, managing director of Experian Consumer UK&I, 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.

“We understand that people can find the topic confusing, but the good news is that it is possible for everyone to take control.”