Recent studies on people’s credit score knowledge has found some disturbing results, with more than half of one particular study of young participants not being able to correctly define what their credit score was.
With the UK household debt increasing to heights similar ofthat seen just before the last financial crash, to say the least, this latest research is yielding some worrisome results; a healthy contributor to this trajectory in UK debt being the consumer finance loans (CFL) people with low credit scores are getting out. Therefore, educating people on how toimprove upon their credit score could help to lessen the amount of such risky consumer finance loans being applied for, meaning less debt for the general public and less debt for the country.
There have been many ways proposed in which people could be lowering their credit scores unknowingly. Awareness of these moves that affect your credit score can then be used to restrict the damages done to this score, and further lessen the risk of becoming over indebted through such factors as using loans.
One major and most commonly recognised way that has beenclaimed to lower your credit score significantly is debt and missing repayments for basic things like credit cards and phone bills. You can also damage your credit score by association, by having a joint account with a partner who has bad credit.
In addition to this, “hard” credit application searches will lower someone’s credit score, provided that they have a number of hard searches in a small space of time – since it could look like they are making numerous applications for loans and credit cards and are financially stretched.
The issue with having a lower credit score means that you are less likely to be accepted for mainstream finance including loans, credit cards and mortgages and instead, you are limited to loans for people with bad credit. For unsecured loans, this can involve paying up to 1,000% APR for high cost loan products compared to just 3% to 12% for good credit customer. For credit cards, this means paying up to 36% interest per month, compared to 0% interest for perfect credit.
The UK household debt from 2012 to 2017 has increased a disturbing 7%, affecting up to 8 million Britons and a total rising from £1,518.5 billion to £1,630.1 billion in five years. Acknowledging and further preventing the ways that you could be lowering your credit score could help to reduce these figures, lessening one of the many financial elements that are contributing to this upwards trajectory for the UK’s debt, in addition to lessening your own overall indebtedness and improving your financial stability.