HALF of 16-24’s don’t know that a missed payment can hurt their credit score


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Young borrowers are unknowingly risking their financial future, and many are unaware of the damaging consequences of missing loan or credit card repayments.

More than half (54 percent) of 16- to 24-year-olds were unaware that a missed credit payment could affect their score and negatively impact their chances of getting credit in the future, according to research from Compare The Market.


Nearly half did not know that their creditworthiness would be checked when applying for a credit card, and 45 percent did not know that their credit histories were also checked when taking out mortgages or personal loans.

According to Compare The Market, 54 percent of 16- to 24-year-olds don't know that missed loan or mortgage payments can affect their credit score.

According to Compare The Market, 54 percent of 16- to 24-year-olds don’t know that missed loan or mortgage payments can affect their credit score.

In the wider population, more than two-thirds of people knew that credit scores were used to check credit card eligibility, and only 71 percent knew they were used for mortgages or personal loans.

The survey described a lack of awareness among many young people about what specific actions affect credit scores, and found that many were unsure how to improve their rating.

“Credit scores are used by lenders to understand whether a borrower can afford a product and assess whether they can repay it on time,” said James Padmore, head of money at Compare The Market.

“Certain actions can affect your credit score, both positively and negatively, and our research shows that while young adults think they have a handle on credit, there is a significant knowledge gap.

“Unfortunately, if you have a low credit score early in life, it can affect your ability to get a mortgage or a personal loan, for example.”

More than half of young people didn’t realize that a bad credit score could make them ineligible for the most competitive deals, be it a mortgage, personal loan or credit card.

Nearly three-quarters did not realize that voter registration could have an impact on their creditworthiness, while more than two-thirds did not know that the length of their credit history could affect their score.

District court rulings, individual voluntary agreements and bankruptcies, all of which remain on a credit report for six years, negatively impacted only 43 percent of the youth.

Beware of Buy Now Pay Later schemes

Buy now, pay later schemes like Klarna have become a popular form of credit, with five million people using these products during the pandemic, according to the FCA.

These arrangements allow buyers to defer or spread the cost of a purchase over a period of time rather than paying the full cost at once at the time of purchase.

More than half of “Buy Now, Pay Later” users between the ages of 16 and 24 missed at least one payment for these types of purchases in the past year.

While most programs perform a soft credit search when a customer makes a payment – which will not appear on a person’s credit report – some products require a hard credit search.

This means that if buyers miss a payment or fail to repay their debts on time, it could be flagged in their credit report and affect their ability to apply for credit in the future.

How can people check their score?

A credit report not only displays an overall credit score, but also lists a person’s credit accounts, such as bank accounts, credit cards, utilities, and mortgages.

It also shows their refund history, including late or missing payments.

Young people will need to see their report first before they can better understand where they can improve.

There are a number of ways to view your rating and history for free.

Experian and Equifax offer 30-day free trials of their service online, but remember to cancel before the end of the promotion to avoid subscription fees.

Ten tips to increase your rating

1) Register on the electoral roll at your current address

2) Use a credit card responsibly and always try to keep a good amount of available credit

3) Check your credit report regularly and ask to correct any errors

4) Never withdraw money from your credit card credit

5) Limit applications for new credit

6) If you have bad credit, stop applying for more credit

7) If you don’t have a credit card, buy one – but make sure you pay it off every month

8) Don’t Miss Refunds

9) Let your credit history ripen

10) Don’t keep unused cards

Experian starts charging £14.99 once the 30 day free trial is over while, Equifax back to €7.95 per month.

Check my file also offers a free trial to check your reports with both Equifax and TransUnion UK – although it will charge £14.99 per month after 30 days.

Alternatively, you are entitled to one free copy of your credit report every 12 months from each of the three major credit reporting agencies.

Free credit report options can also be found by visiting Credit Karma and Clear score.

Why is it important to improve your score?

Your credit score reflects how reliable you are with credit, and it affects your ability to borrow money.

Having a good credit score increases your chances of getting a mortgage, credit card, or loan in the future and gives you access to better deals.

“I would always recommend that you keep an eye on your credit score, especially if you’re considering taking out a mortgage,” said Andrew Montlake, general manager at Coreco Mortgage Brokers.

“Lenders have more difficult credit scoring systems to succeed if you only have a 5 percent or 10 percent down payment, for example.

“It’s important to make sure there are no errors in your report and take action to improve your score whenever possible before applying for a mortgage.”

How can you improve your score?

There are a number of ways people can improve their scores, including by registering at their current address on the electoral roll, using a credit card responsibly, and making sure they don’t miss out on refunds.

“Just a few small changes can make all the difference in ensuring that you’re accepted for credit later, such as signing up for the electoral roll, not opening too many accounts at once, and keeping your credit card balance 25 percent below the limits,” Padmore said.

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