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Younger borrowers oblivious to credit score risks

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In the 16-24 year-old age bracket, 45% don't know that credit scoring is used to qualify for a mortgage, while 49% are unaware that credit scores are used to check credit card eligibility.
Younger borrowers oblivious to credit score risks

Among these younger consumers, 54% are unaware that missed loan or mortgage payments can damage their credit score and make it more difficult for them to secure credit in the future.

Almost three-quarters (72%) do not realise that registering on the electoral roll has an impact on your credit score.

Nearly 9 in 10 (85%) 16-24 year olds say they know what a credit score is and what it is used for, but half (49%) are unaware that credit scores are used to check credit card eligibility, and 45% are unaware that credit scoring is used to secure mortgages or personal loans.

The new study by reveals a gaping knowledge gap about credit among young people which is significantly greater than other age groups. Of the wider population, nearly a third (31%) don’t know that credit scores are used to check eligibility for credit cards, and 29% are unaware they are used for mortgages or personal loans.

When asked what specific actions can impact credit scores, there is a general misconception among young people. Many are not aware of the small steps they can take to improve their credit rating. While 87% claim they are aware of what can affect it, nearly three-quarters (72%) do not realise that registering on the electoral roll can have an impact and over two-thirds (68%) are unaware the length of your credit history also can influence your score.

The longer you have a credit rating, the higher it usually is due to a longer history of repayments. County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) and bankruptcy – all of which stay on a credit report for six years – were also only known to have a negative impact by 43% of young people.

Many also do not fully understand the impact of missed payments. 54% are unaware that missed mortgage payments and missed credit payments (49%) can impact their score and negatively impact their chances of securing credit in the future. More than half (58%) of young people also do not realise a poor credit score could lead them to being ineligible for the most competitive deals.

Buy Now Pay Later schemes (BNPL) have become a popular form of credit with 5 million people using these products during the pandemic.* BNPL schemes allow shoppers to delay or spread the cost of a purchase and are now a commonly used form of credit. Most will run a soft credit search when a customer makes a payment – which won’t show up on an individual’s credit report – but some types of BNPL products require a hard credit search. In these cases, if shoppers miss a payment or fail to pay back their debts in time, it could be marked on their credit report. Over half (58%) of BNPL users aged between 16 and 24 have missed at least one payment on BNPL purchases in the last year.

James Padmore, head of money,, said:

“Credit scores are used by lenders to understand whether a borrower can afford a product and assess their ability to pay it back on time. Certain actions can impact your credit score, either positively or negatively. Our research shows that while young adults believe they have a handle on credit, there is a significant knowledge gap. Having a low credit score early on in life could unfortunately affect your ability to get a mortgage or a personal loan, for instance.

“Just a few small changes can make all the difference to ensure you’re accepted for credit later on, such as registering on the electoral roll, not opening too many accounts at once and keeping your credit card balances 25% under the limits.”


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