Vanquis Study Highlights ‘Bad Credit’ Mortgage Problem
3 minute read
A recent study by the credit card provider Vanquis has found that low credit scores are becoming an increasing problem for prospective homebuyers in the UK. The research revealed that one-in-four of those aged 24 to 35 had been declined a mortgage due to bad credit, with more than 53% of this age group not checking their credit score before the point of application. Although the awareness of the impact bad credit can have on a mortgage application improves slightly with age, one in five of the older age group has still been declined a mortgage, with 43% never checking their credit score. These figures are worrying given the importance of a good credit score in the modern world when allowing us to access affordable financial products.
The Importance of Building a Good Credit Rating
Building a good credit rating is an important part of achieving the things we want in life, like accessing a mortgage to buy a house or being able to access an affordable credit stream. That’s why it’s so concerning that many people can get to the point of applying for a mortgage without ever having checked their credit score. The study also found that there are many myths out there surrounding bad credit, with one-in-ten people believing that the act of checking your credit rating in itself could actually impact your score. Perhaps more worrying still is the fact that 10% of people thought the route to a good credit score was not to borrow any money at all.
Busting Those Bad Credit Myths
One of the leading causes of bad credit identified in the study was the lack of financial education in the school system. There is currently nothing in the curriculum that focuses on financial or life skills and this is leading to a number of misconceptions. Common bad credit myths include: – I’ve never borrowed money before so my credit rating must be great! Not necessarily true. If you have never borrowed before then the lenders have no idea how good you will be at making the repayments. This could negatively affect your credit score and the products you can access. – My credit score will change very little over time Your credit score will actually change in line with your financial history and personal information. So, if you apply for a new credit card, get a loan or move house, you are likely to see a change. – I have a number of credit cards, but I always pay my bills so it won’t affect my score Having multiple credit lines at any one time, even those you don’t use, could damage your credit score. To keep your credit score high, your best bet is typically to have no more than a couple of credit streams you regularly use. – My low credit score means I’ll be put on a ‘bad credit blacklist’ There’s no such thing as a credit blacklist. Every time you apply for credit your financial history will be taken into account and a decision will be made based on your repayment history and the amount of money you owe.