Many people are making significant financial errors which could be damaging their credit rating, with over half of the UK unaware of what their score is, new research has found.

Adults in Britain owe more than £70bn on credit cards and almost half (43 per cent) of people do not know how to improve their credit rating, comparethemarket.com revealed.

The research suggested that the UK has many “blind spots” when it comes to applying for credit, with people unaware of how to maximise their chances of securing a loan or a new credit card or borrowing at the best rates available.

When quizzed on what factors could negatively influence their credit score, as many as 90 per cent did not know that closing a credit card might negatively impact their rating, and 17 per cent were unaware that late payments on their bills would also have an effect.

Equally, many respondents were not aware of the small steps that can be taken to improve their credit rating and become a better borrower. Just 40 per cent of people realised that registering household bulls in their name can positively impact their rating. Over half (54 per cent) had not appreciated that registering on the electoral register could also improve their score.

According to the research, a fifth of UK adults have had a credit card application declined, with a poor credit history cited as the most common (57 per cent) reason for not being accepted. This was following by having too much debt already (30 per cent), while a quarter were declined because their income was not high enough. When looking at 18-24 year olds, this figure jumps to almost one in three (32 per cent).

comparethemarket.com suggested that the high rate of rejections could coincide with the number of people “in the dark” about how much they would be able to borrow and, as a result, requesting an unrealistic credit limit. Just over one in ten believe that, if they were to take out a credit card today, they could borrow up to £5,000. However, a similar number do not think they would be able to borrow any money whatsoever.

Commenting, comparethemarket.com director of money John Crossley said: “Taking out credit can be a positive and productive act, helping us pay for home improvements, holidays, a new car. But it is so important to make sure you are taking the steps which prove your responsibility to lenders, while also ensuring you only borrow what you can afford to repay. Just a few small changes could make all the difference between being accepted for a credit card or not.

“When applying for credit, take the time to understand how likely you are to be accepted by doing a soft check online and it’s a good idea to shop around for the most competitive cards which offer the best rates and rewards.”

There are many tools available to help people work out their borrowing eligibility but as many as 80% of people have never used a soft credit checker before applying. Soft checkers calculate the percentage chance of being accepted for credit cards, without impacting your credit score.

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