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10 Credit Score Myths that are Completely Wrong

There are so many rumours that circulate in relation to credit scores and reports. This guide will go through some of the most common credit score myths and explain why they’re totally false.

Credit score myth one:

Not borrowing money improves your credit score.

Why it’s false:

Not borrowing any money at all definitely won’t build up your credit score, it may even mean that you won’t have one at all. This is because your credit score is based off of your borrowing history, and lenders will look at this to determine your ‘risk factor’. If there’s no credit history to look at, it’s likely that most lenders will place you in a higher risk category, therefore charge you a higher interest rate, just to cover their backs.

Credit score myth two:

Closing a credit card will improve your credit score.

Why it’s false:

If you have available credit that you don’t use, or use very little of, this will look very good on your credit report. This is because it will give the impression that you’re good at managing money and you don’t need to rely on using credit. So, if you have a credit card that you no longer need, don’t close the account, keep it open and just leave the card at home in a safe place.

Credit score myth three:

You have to earn a lot of money to have a good credit score.

Why it’s false:

The amount of money you earn does not directly affect your credit score. Your score is determined by how you borrow money and whether you pay your bills and pay off loans in time. So as long as you borrow responsibly and don’t consistently miss or make any payment late, your credit score will be in good standing no matter how  much you earn.

Credit score myth four:

You only need to check your credit score if you’re applying for a loan.

Why it’s false:

You should check your credit score at least once a year – but two or three times a year would be even better. It’s important to make sure all of the information on your credit report is always kept up-to-date and correct as any errors may be negatively effecting your score.

It will also alert you to any potential fraud or identity theft – for example, you will be ale to see if any loan applications have been made in your name but wasn’t you.

Monitoring your score will also allow you to keep track of how you’re managing your payments, how much you have left to pay on your loans, and allow you to make any changes ahead of applying for credit if needs be.

Credit score myth five:

Having a bad credit score means you won’t be able to obtain credit.

Why it’s false:

Although having a low credit score may be you won’t qualify for the best products or the best interest rates, it doesn’t necessarily mean that you won’t be approved for anything. This is because your credit score isn’t the only thing that lenders take into account when determining your creditworthiness – they may also look at your income and other debts.

So, you should still be able to obtain some forms of credit, but you may just have to pay a bigger deposit or higher interest rate.

Credit score myth six:

Checking your credit report will hurt your score.

Why it’s false:

Checking your own credit report will not affect your credit score. A ‘notation’ goes on your credit report every time somebody, including you, looks at it. However, it will only potentially affect your score if this is an external company in relation to a credit application. Regularly checking your report will actually show responsibility and good money management (although this won’t boost your score.)

Credit score myth seven

Personal demographics affect your credit score.

Why it’s false:

Your credit report do not provide much demographic information – apart from your name, date of birth and address. No information is detailed about such things as race, ethnicity, religion, profession, disabilities, or sexual orientation. It also doesn’t detail your income or how much money you have in savings or retirement accounts.

Credit score myth eight:

Couples have a joint credit report.

Why it’s false:

There is no such thing as a joint credit report. If you’re a married couple or in a serious relationship, you may have joint accounts and  finances like a mortgage, vehicle loan and credit cards. Each of these joint accounts will show up on both of your reports, but the report itself is still yours and yours alone.

Credit score myth nine:

Paying off debts erasing them from your credit report.

Why it’s false:

Paying off your debts will certainly get rid of your obligation to that lender, but it won’t just vanish from your credit report. If you pay of your debts in full and on time, you’ll actually want that to remain on your report as it shows you’re a good borrower. But most negative information on your report, such as missed or late payments, county court judgments and bankruptcies can stay on your report for up to seven years.

Credit score myth ten:

You can pay someone to fix your credit score.

Why it’s false:

If you have a history or late and missed payments, there is no magical way that an external company can have this accurate information removed from your credit report. There is nothing these companies can do that you can’t do for yourself. The only real way to increase your credit score is by practicing good money management.

Article written by Neil Andrews, founder KIS Bridging Loans.

 

Musings Of A Tired Mummy

Award-winning writer, blogger, social media consultant and charity campaigner. Social Media Manager for BritMums, the UK's largest parent blogging network Freelance clients include Firefly Communications and Save the Children UK. Works with brands on marketing projects. Examples include Visit Orlando, Give As You Live, Coca-Cola and Kodak. Cambridge Law graduate with many years experience working across three sectors in advice, media relations, events, training and project management. Available for hire at affordable rates.

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