People born between 2002 and 2008 issued money warning - 'you could be paying too much'

Lloyds Bank has issued an alert as some simple mistakes could mean higher bills for key purchases - full list

A recent survey revealed that young people are "significantly" less confident, informed and aware of how credit actually functions compared to older generations. This could result in long-term financial difficulties as they fail to recognise the broad range of factors that could be damaging their credit score. The research discovered that despite making greater use of credit products such as Buy Now Pay Later schemes, barely half of 18 to 24-year-olds were aware that missing a loan repayment or bill would harm their credit score, with only 46% understanding what a 'minimum repayment' is. Experts have cautioned that this knowledge gap could leave young adults "sleepwalking" into financial turmoil. Furthermore, some of the factors that young people believe would directly affect their credit score actually have no impact whatsoever. This included income, which 43% thought had a bearing on their credit score. A credit score is a crucial piece of information that assists lenders in determining what kind of borrower you are likely to be. According to Experian , it is designed to demonstrate whether you can manage credit responsibly over time by examining how you've handled credit and debts previously. A lower score will likely result in lenders viewing you as a greater financial risk, meaning you may encounter higher interest rates, restrictions such as requiring a guarantor, or fewer options when seeking credit. Higher scores typically offer more choices at reduced costs. In certain instances, you may be able to boost your credit score simply by refreshing the information on your credit file. While others may need to alter how they handle their finances in order to raise their score, as highlighted by Citizens Advice. According to Lloyds Bank , the main factors that affect credit scores are: Borrowing history Repayment history Joint accounts Your credit accounts and how you manage them Existing credit and balances Moving addresses Being on the electoral roll Factors that won’t affect your credit score: Your income and savings Receiving benefits Living with other people but not having joint accounts Payment defaults and financial issues from more than six years ago Using a debit card Soft credit checks and quotes Neil Kadagathur, Co-founder and CEO of Creditspring , the firm behind the survey, said: "This research shows that many young adults are using credit before they fully understand the basics that keep them safe. "That matters, because missing repayments, paying late, or misunderstanding the terms of a product can have lasting consequences. If people are engaging with credit earlier through products like Buy Now Pay Later, the information around it needs to be clearer, simpler and easier to act on. "Credit can be a useful tool, but only if people understand the risks as well as the benefits. That is why lenders, regulators and policymakers all have a role to play in making sure young people get the right information at the right time."