With interest rates and inflation remaining at record lows and wages finally rising, Brits are feeling more confident about taking out credit, research from Clearscore.com suggests.
However the credit experts said younger consumers risk paying over the odds for credit cards, overdrafts and loans due to a poor understanding of how their credit score impacts the price they pay for credit.
ClearScore surveyed 2,000 consumers and found that more than half (51%) of 25-34 year olds say they feel more confident about taking out credit than two years ago.
Yet, 42% of this age group – equivalent to 3.7million people – admit they do not check their credit score or even know what it is.
Justin Basini, founder and chief executive of ClearScore, said: “If you want to qualify for the most competitive loan and credit card rates then you need a good credit score. And you have to keep it that way. That means actively managing it on a regular basis – something the majority of younger age groups do not do.”
Those in the lower band credit score (“very poor or poor”) can pay £400 more in interest on a typical £2000 credit card balance when compared to the interest charged to someone in the highest credit score bracket (“excellent”).
Interest rates can vary by 16% between the best credit cards in the market – generally only available to those with an excellent credit score and those with a poor credit score.
Basini added: “More confident younger consumers taking out credit for the first time are particularly vulnerable. Ironically, because they have no credit history, lenders have no evidence they can repay on time meaning they see them as higher risk and score them lower.
“The fact this age group often lives in rented accommodation and moves address regularly compounds the problem.”