The truth about credit score myths
Walking on cracks won’t break your back.
Tomatoes are in fact a fruit.
You don’t have to live at the beach and watch the sunrise just to be able to do yoga, so stop using it as an excuse, and all that chocolate you ate over Christmas….it hasn’t made you put on weight.
Just kidding on that last one, Christmas Chocolate is always the culprit! But the point is, there are many little things we hear, read or think in life that actually aren’t true.
When it comes to your finances there is information floating around that is not factual and that can be confusing for the large proportion of us who aren’t too familiar with these things, and even to those that know a little more it can still be a mine field and the jargon alone can be off putting. To a lot of us, credit reports and credit ratings are a fairly new worry and there are myths surrounding these already.
But do not fear, the credit rating ravens are here to banish them…hopefully for good.
Checking my credit score and credit report will have a negative effect on it
This is a common misconception, many people think that checking their credit score and report will have a similar effect on their score as, say, applying for a loan or credit card. It is important to know your score and to know the information on your report and checking these won’t have a negative impact on your credit rating. It is best to check these yearly, but if you are looking to apply for a mortgage for example and are trying your best to increase your credit score, it may be better for you to check it more frequently so you know whether what you are doing is working or not.
If I have or have had a bad Credit Score, I am on the dreaded Credit Blacklist
There is NO CREDIT BLACKLIST. This is an important one because no matter how many times you read it, someone will tell you that there is and if you’re on it then well, you’re getting coal rather than that nice new house you wanted.
Lenders do not go to a blacklist to check whether you are on it, they take a range of information from credit reference agencies as well as your application form to make a decision.
I already have a bad Credit Score so it’s with me for life
Don’t be dramatic, you’re bad credit score will not stay with you forever. There are plenty of things you can do to improve it. Utilising a credit card if you don’t already have one to show you are money responsible. Make sure you’re on the electoral roll. Check the information on your credit report is correct, and so on. Just because you have a low score now, doesn’t mean it will last forever.
I’ve paid up my debts so they will be wiped from my record
Although you can improve your bad credit score, don’t be fooled into thinking that if you clear up those payments you missed, all sign of it will be wiped off your credit report. If you miss a payment it will show on your report for on average 7 years as this is essentially your credit history, although it will show as paid when you have fixed the issue.
Surely the more Credit Cards I have, the better my Credit Score will be
We can’t give you a right or wrong amount of cards you should have as essentially all the banks want to know is, are you good at managing your money. You could have an awesome money organiser with all sorts of colour coded tabs for this payment and that appointment but just remember that the more you have the riskier it can be to stay on top of them and the more you default, the more it can impact on your credit score.
So, I should only have one card and stick to it
No one knows you more than you. If you aren’t the colour coded tab sort of person and you do sometimes forget or occasionally you don’t have as much left at the end of the month as you thought you might, then yes you can stick to one. If you are sure of your money managing abilities though it might be worth your while taking advantage of the offers you can get and maybe have a back up low interest rate card for any emergencies that you know you can’t pay off immediately.
I don’t want a Credit Card, I use my debit card to make sure I’m always in the clear
Although using your debit card can be an effective way of managing your money and you might think by doing so it can only give you a fantastic credit score, unfortunately it does not have any impact on your Credit Score. If you think you are able to pay it off, getting a credit card may be more useful to you.
I pay everything with cash as it helps me curb spending, this must make my credit score high
Similarly, cash payments may help you save some pennies, but lenders won’t come to the shops with you to understand this, they will look at your borrowing history to see if you are reliable. Whilst you don’t want to borrow credit and may not be able to pay it back, you also don’t want to always pay cash and not build up a credit history. It might be a fine line, but you can walk it.
I try my best but my two housemates’ scores are low, so mine must be too
Just because the people you live with have poor credit scores, doesn’t mean yours will be too. Unless you have links financially with someone that you live with, their credit score won’t be linked to yours, and your good score won’t be linked to theirs!
Employers won’t look at my Credit Score
It may surprise you to know that a lot of employers do now take your credit history into account when you apply for a job. Don’t get me wrong, not all employers will carry out a credit check on you and it will differ depending on what type of job you’re applying for, but some employers will be reassured by your good credit score. Just a little thing to keep in mind when you are job searching.
Paying off my bills will add *so* many points to my score
It would be nice if our credit scores worked in a way that we knew how many points are added for each good thing we do. Unfortunately they aren’t that rosy and paying your debt won’t automatically add 60 points to your score. There are a lot more factors that are taken into account than we would like to spend our Sunday mornings trying to calculate, so just be happy that paying off those debts will increase your score.
If I maintain paying the minimum off my credit card it will boost my credit score
Have a high amount on your credit card? You may seem irresponsible to lenders if you continue to just pay the minimum each month, so it’s better for you to pay the full amount on time. Only have a low amount? Your still not gaining anything by paying the minimum as you will be losing out on the interest you’re charged. You wouldn’t throw a tenner in the trash each month would you? So try to make sure you are paying more off, if you can’t afford the whole amount then pay as much as you can afford.
A prepaid credit card will mean a good credit score
Much like just having a debit card, a pre-paid card will not affect your credit score. You aren’t proving that you are able to manage money well. Showing you are responsible with borrowed money is what will help your credit score.
My well educated background will mean I have a better score
This is one area where you cannot rely on your educational background to help you out. Don’t mistake this for knowledge though, the more you know and understand about your credit score and report, the more you will be able to understand how to improve it. But your education is not included on your report and so will not have a bearing on your score.
More money means a higher score
A lot of money can buy you a lot of things. Your income won’t help credit score though. If you are not using your money wisely and showing lenders that you are doing so, your score and report will reflect this.
So I think it’s safe to say we’ve all learnt something here.Don’t always rely on what you hear and if you’re unsure then do some research so you know you’re stuff.
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