Of the wider population, nearly a third (31%) did not know that credit scores are used to check eligibility for credit cards, and 29% were unaware they are used for mortgages or personal loans.
An estimated 45% of 16 to 24-year-olds are unaware that credit scoring is used to secure mortgages or personal loans, according to comparethemarket.
In addition, 49% were unaware that credit scores are used to check credit card eligibility.
Of the wider population, nearly a third (31%) did not know that credit scores are used to check eligibility for credit cards, and 29% were unaware they are used for mortgages or personal loans.
When asked what specific actions can impact credit scores, 87% claimed they are aware of what can affect it, but nearly three-quarters (72%) did not realise that registering on the electoral roll can have an impact and more than two-thirds (68%) were unaware that the length of credit history also can influence the score.
County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) and bankruptcy were also only known to have a negative impact by 43% of young people.
Many also did not fully understand the impact of missed payments, and were unaware that missed mortgage payments (54%) and missed credit payments (49%) can impact their score and negatively impact their chances of securing credit in the future.
More than half (58%) of young people also do not realise a poor credit score could lead them to being ineligible for the most competitive deals.
James Padmore, head of money at comparethemarket, said: “Credit scores are used by lenders to understand whether a borrower can afford a product and assess their ability to pay it back on time.
“Certain actions can impact your credit score, either positively or negatively. Our research shows that while young adults believe they have a handle on credit, there is a significant knowledge gap. Having a low credit score early on in life could unfortunately affect your ability to get a mortgage or a personal loan, for instance.
“Just a few small changes can make all the difference to ensure you’re accepted for credit later on, such as registering on the electoral roll, not opening too many accounts at once and keeping your credit card balances 25% under the limits.
“When applying for credit, take the time to understand how much you could borrow by using a soft eligibility checkerwhich won’t affect your credit score.”
