Quarter of credit card owners don’t know what a credit rating is
New research by Confused.com shows how little UK credit card owners really know about their own credit rating. One in four (27%) don't even know what the term credit rating stands for - a worrying statistic.
Even among those who are familiar with the term credit rating - which refers to "a calculation of someone's ability to pay back money which they have borrowed" - there is a lack of knowledge about their own credit history and what factors can affect their score.
Six in 10 (61%) don't know what their own current credit rating is. Meanwhile, 40% say they have never checked their credit rating and 36% have not checked their credit rating in the past 12 months.
Clueless credit card owners
One in five (19%) credit card owners didn't know that missing repayments on your credit card could potentially affect your credit rating. This is despite 20% of credit card owners having missed a payment on their credit card in the past 12 months and 9% having missed more than three payments in the past 12 months.
A massive nine in 10 (87%) didn't know that using your credit card for gambling online could potentially affect your credit rating. This is because the transaction is classed as a cash advance - an amount of money that someone borrows and on which they start to pay interest as soon as they receive it. Despite the downsides, one in 10 (11%) credit card owners have used their credit card for online gambling at some point.
More than one in four (28%) didn't know that multiple applications for a credit card can potentially affect your credit rating. But 7% of credit card owners have previously been rejected for a credit card and applied for another in the space of a few weeks.
Meanwhile, more than half (55%) didn't know that taking out a payday loan can potentially affect your credit rating, which it can both positively and negatively. But a minority (5%) of credit card owners have run the risk of negatively affecting their score by previously applying for a payday loan.
And only 17% knew your credit rating can affect your chances of getting certain types of jobs, which it can when applying for employment in the police force or the financial services industry, for example.
Separating fact from fiction
The research shows the extent of many credit card owners' confusion, with many believing things to be true when they're not. For example:
5% wrongly thought buying alcohol on your credit card can potentially affect your credit rating.
30% incorrectly believed your age can potentially affect your credit rating.
15% thought giving someone your credit card PIN could potentially affect your credit rating, which it can't despite being very bad practice when it comes to security.
Nerys Lewis, head of credit cards at Confused.com, said: "It is important to know the facts about your credit rating as it can affect your ability to apply for things such as mortgages, loans and get the best credit card rates.
"If you don't know that using your credit card for online gambling can affect your rating, for example, you could potentially be harming your score without realising it.
"We hope by highlighting the importance of knowing the facts when it comes to credit ratings, it will encourage more people to give it some thought."
You can apply for a copy of your credit record from credit reference agencies Experian, Equifax and Callcredit - charges may apply.
And when it comes to applying for a new credit card, to help avoid multiple applications from harming your credit history, Confused.com offers a card matcher service which lets you know your likelihood of being accepted for a card before you apply.
Lewis added: "Just because you have a perfect credit rating, however, doesn't guarantee you'll be accepted for every financial product, so make sure you only apply for ones that are suited to you."