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Poor credit epidemic among under-25s

Poor credit epidemic among under-25s

Category: Credit cards

Updated: 02/09/2016
First Published: 02/09/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Millions of young adults are damaging their future chances of getting a mortgage or loan by downgrading their credit rating before they turn 25, according to research from Amigo. As many as two-thirds of 18 to 24-year-olds who know their score currently sit in the 'very poor' category of credit (defined as 0-560 by credit check provider Experian).

The effects of poor credit could be far-reaching, with the epidemic possibly resulting in a dearth of young adults able to get on the property ladder. What's worse, the effects could expand, as rejected mortgage applications make it even less likely for would-be borrowers to get a mortgage on their following application. Given that additional research claims that half of UK adults are likely to be refused credit at some point, it's important to do everything you can to make sure this does not happen when you are applying for a mortgage.

Common reasons for poor credit among the age group are late or missed bill payments, unauthorised overdrafts and credit card rejections. Indeed, 12% of under-25s admit to missing a monthly phone bill, while 11% say they've missed a credit card payment and 10% have fallen into an unauthorised overdraft.

Those that have managed to avoid these credit score-reducing traps may still not be in the clear, as a third of respondents claimed to be unaware that having no credit history at all would also affect their chances of getting a mortgage. While it may seem counterintuitive, people with no credit history might consider getting a credit card to use for small payments that can immediately be paid back, in order to have a good credit score ready for future mortgage applications.

Further findings shows that poor credit is not confined to lower earners either, with those earning more than £60,000 a year actually having a worse average score than those earning between £10,000 and £60,000. This shows that it is important to keep an eye on and protect your credit no matter how much you're earning, as it may still keep you from getting the house of your dreams one day, regardless of your salary.

What next?

If you're not sure what your own credit rating is, sign up to a credit check provider and find out what score you are working with

For those with a poor or non-existent credit score, check out our guide and consider applying for a top credit card deal with the intention of paying your credit card bill on time every month. Specific credit repair cards also exist, which should only be used to help you improve your score.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.