New research reveals that millions of Britons are putting their financial futures at risk by neglecting their credit scores, with young adults particularly likely to overestimate their creditworthiness.
The Credit Score Blind Spot
A comprehensive study conducted by money platform Intuit Credit Karma uncovered alarming trends among UK consumers. The research involving 2,000 Brits found that people in their 20s demonstrate the worst credit denial, frequently believing their scores are better than average when they're often significantly worse.
What makes this more concerning is that 22% of young adults admitted they didn't know their current credit score and found the entire concept confusing. This knowledge gap could have serious implications for their ability to secure mortgages, loans, and competitive interest rates in the future.
Understanding Credit Checks
Financial experts emphasise the importance of regular monitoring through soft searches, which don't affect your credit rating. These can be conducted using services like Experian, Equifax, or TransUnion, and many banks now offer this service directly to customers.
Mamta Shanbhag, borrow director at Tesco Bank, explains the critical difference between search types: 'Hard checks occur when a company makes a complete search of your credit report, for example when applying for a loan, mortgage, or even a monthly contract for your phone.'
Hard credit checks remain visible on your report for at least 12 months and can significantly impact your score. Shanbhag advises minimising these by reducing credit applications wherever possible.
Building and Maintaining Your Score
Contrary to popular belief, avoiding debt doesn't guarantee a good credit score. Shanbhag clarifies: 'If you have no or little history of borrowing you'll still have a low credit score, as you haven't yet built evidence of being a reliable borrower.'
Recent changes to credit scoring systems now include rental payments, while simple actions like registering on the electoral roll and paying credit card bills on time can substantially improve your rating. Despite these straightforward methods, Tesco Bank found that only 22% of people use credit cards to build their scores.
Nik Charalampous, CEO of free credit score service CredAbility, reveals staggering statistics about financial awareness in the UK. His research shows that 16.6 million Brits have never checked their credit score, representing almost one-third of UK adults. Even more concerning, 31.4 million don't understand how soft searches work.
Charalampous compares neglecting your credit score to never checking your bank balance: 'You're left in the dark about something that can seriously affect your financial options.' His research indicates that 28% of people have made significant credit decisions without checking eligibility first, potentially damaging their scores through rejections.
Practical Improvement Strategies
Financial experts recommend several proven methods to enhance your credit standing:
- Keep credit utilisation below 30% of your limit
- Space out credit applications to avoid appearing desperate to lenders
- Treat Buy Now Pay Later schemes as formal credit arrangements
- Maintain stability in address, employment, and voter registration
- Close dormant joint accounts with previous partners or housemates
Charalampous notes that avoiding multiple credit applications could add up to 125 points to your score, while keeping credit card balances low might contribute another 95 points.
Financial podcaster Vix Leyton emphasises the importance of regular monitoring: 'A wrongly flagged missed payment can shave points off for years.' She recommends using free dispute processes offered by each credit agency, even if you don't anticipate needing your score immediately.
Looking ahead, open banking will soon incorporate regular subscription payments like Netflix or Spotify into reliability assessments, making consistent small payments increasingly valuable for demonstrating financial responsibility.
For those struggling with low scores, experts advise persistence rather than despair. Every month of good banking behaviour contributes to improvement, while negative markers like missed payments eventually drop off after six years.
The consensus among financial professionals is clear: checking your credit score at least once annually provides essential insight into your financial health and helps avoid unpleasant surprises when applying for important credit products.
