Credit report myths continue to cause confusion among UK consumers, finds TotallyMoney Financial Awareness Survey
Embargo 00.01 Thursday 16th May 2019
In their annual Financial Awareness Survey 2019, TotallyMoney asked a nationally representative sample of 2,000 UK adults a series of questions to test their personal finance knowledge.
- A majority (58%) are unaware the electoral register affects credit rating
- Just one in seven (14%) know the credit blacklist is a myth
- Roughly one in three (31%) incorrectly believe student loans impact credit rating
- Almost a third (30%) incorrectly believe Credit Reference Agencies (CRAs) approve or deny applications
Credit blacklisting, criminal records and unpaid student loans. These are just a few of the credit myths that continue to confuse consumers, reveals credit experts TotallyMoney.
The survey revealed some unnerving findings. For example, only 14% of respondents understood there’s no credit blacklist. And just over a quarter realised their address doesn’t affect their credit rating.
But the most surprising (and worrying) result is the connection between credit score and the electoral register.
A huge 58% of adults surveyed didn’t know that being on the electoral register affected your credit rating. This could mean over half of UK adults eligible for credit products are missing out on an easy boost to their credit score.
Alastair Douglas, CEO of TotallyMoney, warns myths breed credit danger and missed opportunities. Douglas said: “The world of credit is already, at times, a complex and confusing place. “Myths about blacklists, unpaid student loans, and some addresses being more favourable than others, adds to the confusion. And can even be damaging. “Believing the fictions might influence someone’s decision whether to press ahead and get the support of a credit card or loan, or not. And sometimes the financial support of credit products helps with life-changing decisions. “It’s terrible to think some people put off certain financial decisions because they believe they’re blacklisted. Or that someone looking to improve their credit score doesn’t know about the benefits of getting on the electoral register. “If people avoid applying for credit they’re entitled to and make compromises because of misinformation, it can have a real impact on their financial decisions. And our findings show there’s still a lot of confusion among consumers. “One way to clear up some of this confusion is to get your free credit report. TotallyMoney’s unique credit report analysis shows you what really goes into your credit score and report, and gives you the facts to better understand your financial position.” Based on TotallyMoney’s Annual Financial Awareness Survey for 2019, here are the most common credit fictions, some theories on where the myths come from, and the OnePoll survey data.
Sorting credit fact from credit fiction
Myth 1. There’s a credit blacklist
Why people believe it: Being ‘blacklisted’ is a commonly used term in the credit industry. It refers to those who make multiple unsuccessful applications, which damages their credit rating and causes more rejections. People have come to believe this is an actual list they’re added to if they have poor credit history. The facts: There is no blacklist used by credit companies or Credit Reference Agencies. But every credit company has their own criteria, so there are circumstances when a lender won’t accept a credit application. The findings: Our survey found that the majority of people thought the credit blacklist was a document that existed. Only a handful of respondents (14% ) were aware this isn’t the case.
Myth 2. Credit Reference Agencies decide who gets credit
Why people believe it: CRAs hold all the information needed to determine someone’s credit score and create their credit report. This can lead people to believe that because the CRA holds the information, they tell the lender whether to accept or reject a credit application. The facts: A CRA is like a huge data library. They pull information from lenders and public bodies to create an individual’s credit report, but the information they hold is for lender reference only. It’s the lender (a.k.a the credit company) that makes the final decision. The findings: Nearly one in three respondents (31%) believe it’s CRAs that decide whether someone’s application for credit is accepted or declined.
Myth 3. Where you live impacts credit rating
Why people believe it: When applying for credit you need to give your address. The mistaken belief is that you’re asked for your address because where you live counts towards your credit score. The facts: Addresses don’t influence your credit rating. Lenders ask for this information to help them find an individual’s credit file and confirm their identity. The only time addresses can cause a problem with credit applications is if the applicant has recently moved house and not updated the CRAs (this makes it harder for lenders to find the right details). Some lenders also hesitate if they see multiple house moves in a short space of time. The findings: More than a quarter of those surveyed (26%) understood that your address and the area you live in don’t impact your credit rating.
Myth 4. Two scores become one when you’re a couple
Why people believe it: Many couples choose to apply for a joint mortgage, make big purchases together and open joint bank accounts. It’s easy to assume that, as a couple, you have one credit score for both of you. The facts: Everyone’s credit score is individual to them — even if you’ve been with your partner for a long time. While you can be financially linked to your partner and some lenders will look at both of your scores when considering your application, you still have your own individual credit scores. The findings: More than 1 in 2 (52%) were unaware that your partner’s poor credit history could affect your individual borrowing ability, although when you’re a couple, your partner’s credit score is not linked to your own. Around 1 in 5 (18%) thought that your marital status directly impacted your credit score, whilst a few more respondents (37%) knew that any savings — solo or joint — had no influence on credit rating.
Myth 5. A monthly salary improves credit score
Why people believe it: Most credit companies ask consumers to make monthly repayments. Some people wrongly believe that because you have the security of a monthly income, it proves to lender they’re in a strong position to pay their credit bills. The facts: Getting paid a monthly income doesn’t prove to lenders how well you’re able to manage your money or credit. For that reason, when you get paid, or even how much you’re paid, won’t positively or negatively influence your credit score. The best way to prove you can handle credit is making repayments in full and on time. The findings: Just under a third of people (30%) realised a regular, monthly salary has no impact on credit ratings. It doesn’t put you in a stronger or weaker position compared to someone who’s paid weekly, fortnightly or sporadically (like a self-employed person or freelancer).
Myth 6. Criminal convictions impact credit score
Why people believe it: This could tie in with the myths about earnings and address history impacting credit scores. Going to prison can affect both of these, so consumers mistakenly believe criminal records negatively impact someone’s eligibility for credit. The facts: Having a criminal record or being fined doesn’t show up in your credit history, because it says nothing about your ability to make repayments. So, this won’t impact your score. What will affect your score is a County Court Judgement (CCJ) or filing for bankruptcy. A CCJ remains on your credit report for up to six years and declaring bankruptcy prohibits lenders giving your credit for 12 months. The findings: Only one fifth of respondents (20%) were aware that even if you have a criminal record, it won’t affect your credit score.
Myth 7. Unpaid student loans damage credit rating
Why people believe it: Part of being accepted for credit is based on how you repay loans and borrowed money. So, it’s fair to assume that because a student loan is a loan, how it’s paid back is taken into account when working out credit scores. The facts: Students loans aren’t visible on your credit report, so don’t impact your credit score. This is because they’re paid back through salary deductions. However, any credit cards or additional loans you take out as a student — so anything other than your tuition fee or maintenance loan — will show on your credit report. The findings: Of those surveyed, just over a quarter (28%) knew that a student loan can’t affect your credit rating.
For more information, please contact James McCaffrey
TotallyMoney is on a mission to improve the UK's credit score, with their free credit report at the heart of this goal. Today, TotallyMoney is the highest rated free credit report provider on Trustpilot, and has over two million customers (and growing!). They've also won Best Free Credit Report Provider at Moneynet's Personal Finance Awards every year since their launch in 2017.