Are you familiar with some of the UK’s most common financial myths? And would you have even known they were myths to begin with?
Whether it’s worrying about not getting a credit card if you’ve bad credit, or that borrowing small amounts of money will make it harder to get financing in the future, there are plenty of financial myths that need debunking.
With a continuing Increase in the number of credit applications being made across the UK in the last year, the team at Zuto decided to conduct a survey of 1,000 UK consumers to see how well the average Brit understands finance.
Presenting a list of the most common myths, we asked each participant to answer true or false for each one, to reveal just how many Brits believe the most common financial myths, as well as where they get their advice from.
What are the most common UK finance myths?
Although many of the myths on our list are rather common, some have been around for decades.
For starters, 22% of those we surveyed believe that some form of credit blacklist exists which is preventing them from getting finance. This simply isn’t true as it would be counterproductive for lenders to limit their options.
Another of the more believed myths was that every single credit search on an application impacts your credit score, with 20% of respondents answering with true. While this is also a myth, there is a little more substance to it than some of the other questions.
A hard credit check during an application will impact your credit score, but many lenders will conduct what is known as a soft check during the initial application process. This lets them see an overview of your credit profile without affecting your score.
Not only do lenders do this to see your borrowing history, but it also has the added bonus of helping them see what you can afford to borrow in future. A soft search is a key part of getting things such as car finance and is something we do at Zuto so you can find out if you’re accepted without impacting your credit score.
Lastly, other finance-specific myths still believed by UK consumers include 18% of those we surveyed thinking that you can’t obtain a credit card with bad credit, 10% believing that having any credit is a bad thing, and 7% believing that your credit score measures your value as a person.
Absolutely none of these are true. Credit is often an important part of buying expensive items, like homes or cars, and while having bad credit can make getting finance more difficult, it certainly doesn’t prevent you from working with lenders. At Zuto, for example, we work directly with lenders who specialise in bad credit car finance.
What are the least known UK finance terms?
It’s pretty clear which finance myths are worth avoiding, but how about the financial terms that go with these?
Surprisingly, 9% of those we surveyed have absolutely no understanding of any of the financial terms we presented them with. While 9% might not seem much, the fact that almost 1/10 of the population has very limited financial knowledge could prove a problem later in their lives when it comes to bad credit.
Other less well-known terms included CCJs (County Court Judgements), with only 36% of those we questioned having any knowledge of these. Knowing about CCJs is very important, especially if you have bad credit., as they can be a main contributor to a low credit score. If at all possible, you want to settle a CCJ immediately or avoid them altogether.
APR was also another term that fewer people seemed to be aware of, known by just 38% of those we surveyed. APR (Annual Percentage Rate) is the cost you pay each year to borrow money. This is the cost of the loan to a borrower rather than the interest on the money taken out and is a key thing to account for when looking at the cost of finance.
Where do UK consumers get their financial advice?
Perhaps it should come as no surprise that most Brits get their financial advice from the internet: 32% admit that they Google most if not all of their financial questions. While not necessarily a bad thing, it can sometimes be tricky to find accurate information.
Besides Google, 26% of those surveyed admitted to going to family and friends for financial advice, and 25% admitted to not even looking for financial advice at all; something that could make understanding loans and financing tricky for them.
But it’s not all bad news. 23% of those we asked said they go directly to financial advisors when in need of advice, showing that while though they might understand the terminology, they also know who to turn to for a deeper understanding.
There are, of course, plenty more financial myths out there that we simply didn’t have space to include. But if you’re ever unsure about whether or not a piece of financial advice is accurate, it’s always best to speak to a financial advisor for clarification.
And if you are thinking about applying for finance but have bad credit, don’t worry. There are many other things that go into getting financing; understanding your credit score is simply a key step in the process.
Get in touch with the Zuto team today to see how we can help you get the car finance you need or visit our help and advice section for more information on bad credit.