By Kat Kynes
The term ‘credit rating’ is indeed one that looms in our lives - an invisible concept that we abide by so carefully. But what exactly does it mean? And what is its significance? In short, a credit rating is the evaluation of a person’s ability or organisation to fulfill their financial commitments based on their previous financial cases. A credit rating can be assigned to any entity that seeks to borrow money, whether this be a person, a corporation, or a provincial authority etc.
Credit rating is affected by a number of things and if you don’t know what they are - fear not, as over 1 quarter of Brits are with you. Conducting a survey through iCount One Poll asking 1,000 people questions about their credit risk gave us valid insight about the UK’s understanding of their credit rating. Here, we learned that only an astonishing 26.60% of people really understand what their credit rating is.
So indeed, we shall educate the whopping 73.40% of people who do not thoroughly understand this, but firstly, let us examine the factors that respondents felt impacted on credit score rating the most. Offering multiple answers to the question ‘which of the following do you think could have the greatest impact on your credit score?’ unveiled that only a miniscule and actually, rather promising 86 votes said that they ‘don’t know’. From the results, it was apparent that respondents who answered ‘I don’t know’ were predominantly aged 18-24. On the other hand, a promising 74.80% of people agreed that ‘past debts and bankruptcies’ was the answer to the aforementioned question. An incredible 80.59% of people aged 35-44 got this correct, followed by 77.90% of people aged 45-54, 74.79% of people aged 55+, 71.76% aged 25-34 and 66.10% aged 18-24. This 14.49% difference in votes from the 18-24 and 54-55 age categories is perhaps suggestive that the younger generation are not as educated in this sector as someone of a higher age. Perhaps a credit rating renders less significance to the younger generation, as they have not yet had to indulge in such acts of borrowing credit, or moving house etc. as someone of an older age would.
What was particularly interesting from the results was that the South East appeared to be the most knowledgeable about their credit rating. This region made up the highest percentages for the correct answers, followed by London and then the North West. These three regions remained in this order throughout the survey, in which Northern Ireland made up the smallest percentage for the right answers each time, rendering them the least educated region on the subject of credit rating. Other regions, consisting of the Midlands, East Anglia, Yorkshire, Wales etc. fell in random order between the North West and Northern Ireland.
What was also rather interesting was that female voters made up for a higher percentage of the correct answers, despite males suggesting that they themselves had more knowledge on the subject. Drawing upon the previous question which asked respondents what things might have the greatest impact on credit score, over 77% of females voted ‘past debts and bankruptcies’, which fell considerably higher than the 72.28% of male votes. Additionally, a further 38.40% of females agreed that the ‘people who you are financially linked to’ greatly impacts on credit rating, whilst only 30.60% of male voters thought this. Indeed, these are correct. Although, there are various ways to improve a bad credit score. One particularly obvious method is by paying bills on time. When asked this in the survey, a reassuring 683 people voted this, making up 68.30% of the vote. The second highest vote with 48.10% was to ‘ensure there are no mistakes on your file’. Indeed, our credit rating is highly affected by things that involve our payment history and any debts we hold. Responsible ways to ensure you have a good credit rating is simply not to borrow more money than you can owe back, get on the electoral register, cancel unused credit cards and stop applying for credit.