Why it’s good to understand your credit history

Getting a good understanding of the factors that do and don’t affect credit ratings can help you both now, and in the future.

Experian research found that seven out of 10 of Britons (71%) believe they have a good or excellent history of managing credit*.

But two thirds of these (66%), equivalent to almost half the UK population** have never actually checked their credit report or score – and should their credit rating be damaged, it could get in the way of their chances of getting the most suitable deals, and at the best rates.

So that’s why we’ve now launched a series of online guides to help take some of the mystery out of the credit referencing process, and help people take control of their finances.

Some widespread misunderstandings about credit and credit reports include:

  • 15% don’t know that missed payments can damage their credit score, when it is one of the key factors that lenders look for, as it can suggest you are struggling to repay what you already owe. Just one or two missed payments, even if it’s simply down to absent-mindedness, is likely to have a negative impact on how lenders view an applicant, and will remain recorded on a credit report for at least six years.
  • 44% don’t know that making multiple credit applications in a short period can harm their credit score, as lenders can see this as a sign of financial stress or desperation;
  • A quarter (24%) assume that having a good salary means a good credit score –suggesting many may not realise the importance of demonstrating a strong track record of using credit responsibly, assuming instead that their good salaries will sway lenders’ decisions
  • 44% wrongly believe that making just the minimum payments will improve how lenders view them, when the reality is likely to be the opposite, as lenders may also worry this is a sign they are struggling to meet their credit obligations each month.

Understanding how to manage your credit accounts well, and knowing what lenders look for when reviewing a credit application, is key to building an excellent credit score.

Visit www.experian.co.uk/makeithappen to find lots of insight and resources to help you take control of your credit rating. You can also follow the journeys of Becci Burt, Steven Ellins and Paul Holland – three people who plan to turn around their financial situations this year with expert help and advice to improve their Experian Credit Score to help them Make It Happen in 2015.

*Research was carried out online by eDigital in December 2014 among a representative sample of 2023 adults.**71% of the UK population believe they have a good credit history, 66% of whom have never checked their credit score. 0.71 x 0.66 = 0.4686, or 47%.

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