There are lots of misconceptions when it comes to credit reports. From what they do and don’t include, to what does and doesn’t affect your credit score.
We sort the fact from the fiction and expose 20 credit score myths, to help you get to grips with your credit report.
Myth - You have one credit score
Truth - Your credit score varies between the three main credit reference agencies in the UK (Experian, Equifax and TransUnion). They each use their own scoring methods and have different maximum scores. Other credit tools and scoring apps, like CredAbility, generally use metrics from one of the three listed above. See how your score compares to the average in the UK.
Myth - Your credit score never changes
Truth - Your score changes in line with your credit history and financial behaviour. How well you manage your finances can have a positive or negative impact on your credit score and this is constantly changing.
Myth - You have to pay for your credit report
Truth - You can check your credit report for free and request a copy of your statutory report online. (But it does cost £2 if you want it posted out by one of the credit reference agencies).
Myth - Checking your credit score can damage it
Truth - When you check your credit report, a ‘soft search’ is performed, which won’t damage your credit score. A footprint won’t appear on your credit file for others to see, so you can check it as many times as you like.
Myth - An eligibility checker will leave a footprint on my credit file
Truth - Eligibility checkers are used to check the likelihood of getting accepted for credit before you apply. They don’t leave footprints on your credit file or affect your credit score as they only perform a soft search.
Myth – Paying off your debts removes them from your credit file
Truth – Records of your debts will stay on your credit file after you have paid them off. So if you have missed payments or defaults on a debt, a record of this will stay on your credit file for six years – regardless of whether or not the debt has been paid in full. However, the impact it has on your credit score will lessen over time, especially if you have maintained your repayments on time, every time since then.
Myth - People with a bad credit history are registered on a ‘blacklist’
Truth - There’s no such thing as a ‘credit blacklist’. Although lenders do take your credit history into account when you apply for credit, it’s not the only factor they look at.
Myth - A good credit score guarantees lenders will give you credit
Truth - This is not necessarily the case. A good credit score may increase your chances of getting your application accepted, but it’s not 100%. Lenders may see you as less of a risk, based on your previous financial behaviour. But each lender uses their own criteria and they also take other factors into consideration, including your individual circumstances and affordability, for example.
Myth - A high income equals a high credit score
Truth - Your salary doesn’t show on your credit report so it doesn’t affect your credit score at all. Lenders might ask for it on application though, so they can assess your affordability.
Myth - Criminal records and fines show up on your credit report
Truth - Criminal records and fines are not included in your credit report. But if you have been a victim of fraud or committed a fraudulent activity with a lender then this may show.
Myth - Taking out more credit will reduce my credit score
Truth - When you apply for credit it can cause your score to dip in the short term. But you can actually use credit to gradually build up your score if you maintain your payments, on time, everytime. This demonstrates to lenders that you’re a reliable borrower. But, we don’t recommend borrowing more than you can afford to pay back, as this could place you in financial difficulty.
Myth - Lenders can see rejected credit applications
Truth – When you apply for credit, a hard check is carried out on your credit report by the lender. This leaves a footprint on your credit file to show that an application has been made. But lenders won’t be able to see if your application was accepted or rejected. Bear in mind that lenders can be put off if you make too many applications in a short space of time. It can make you appear desperate for credit and could indicate that you are struggling financially.
Myth - If you’re not applying for a mortgage, then your credit score doesn’t affect you
Truth - Your credit score impacts different things, not only your ability to get a mortgage. It can affect whether you can access competitive rates on all forms of credit - from credit cards to loans, and overdrafts. It can even affect your ability to get a new mobile phone contract.
Myth - You can’t get credit with a bad credit score
Truth - There are lenders that specialise in lending to those with bad credit. So you may still be able to get finance despite having a low credit score.
Myth - If you have a very low credit score you can’t repair it
Truth - You can repair your credit score over time if you maintain all your repayments on time, every time. There are also simple things you can do today, like registering to vote online. This can add 50 points to your credit score and only take 5 minutes of your time.
Myth - If you’ve never been in debt, you will have a good credit score
Truth - It may be more difficult to get credit if you’ve never been in debt and have a ‘thin’ credit file. This is because lenders use your previous financial behaviour to decide how risky it is to lend to you. If you don’t have any credit history at all, lenders won’t be able to tell if you’re a responsible borrower or not.
Find out our four top tips for fixing a thin credit file.
Myth - Your savings show on your credit report
Truth - This information is not recorded on your credit report. But lenders might ask you about your income and savings as part of the application process. They may need this information to assess your affordability.
Myth - Closing old accounts will increase your credit score
Truth - Closing old accounts won’t necessarily affect your credit score. Lenders usually look at whether you are a reliable borrower, not just how many accounts you have open. And if you have old accounts that showcase that you’ve managed your money well, keeping them open may work in your favour.
Having said that, if you do have a large credit limit available, it can put some lenders off. This is because there’s the potential for you to rack up a lot of debt very easily. This could put you in financial difficulty. So it’s good to strike a balance and keep your balance under 30% of your available credit limit. This should help to boost your credit score.
Myth - Moving in with someone or getting married can affect your credit score
Truth - This won’t impact your credit score in itself. But if you take out joint finances with them and their credit history is less-than-perfect, this could affect your ability to get credit. This is because lenders may view their credit history when you apply for credit. But you can apply for a ‘notice of disassociation’, to get any old ties removed from your credit report. You just need to get in touch with the credit reference agencies to request this.
Myth - Your credit report includes information about your previous tenants
Truth - This is not true unless you’ve ever had joint finances with them. In which case, you will be financially associated with them. Again, you can ask the credit reference agencies to remove any old ties to boost your credit score.
Find out how to improve your credit score with our 12-week step-by-step plan.
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