5 Common Credit Myths

5 Common Credit Myths

author: Emily

By Emily

We can’t escape ‘fake news’ these days – even in the world of credit!


Understanding how your credit score works can be baffling at the best of times. When you throw false advice and rumours into the mix, it certainly doesn’t help!

If you find yourself scratching your head over credit advice, then worry no more. We’re here to set the record straight, as we reveal the truth behind these common myths.

Drumroll please...

1) “Missed payments don’t count if they happened ages ago”

Actually, a missed payment on your credit card can stay on your report for up to a staggering six years. Whether it’s a few slip-ups or a one-off mistake, you could be paying the price for longer than you think.

Mistakes like County Court Judgements (CCJs) and bankruptcies can stick around and harm your credit report for even longer. Not a good look if you’re planning on taking credit out any time soon!

Handy hint: If you’re worried about missing payments, you could set up a Direct Debit to make sure your payments are always on time.

2) “It doesn’t matter how many credit cards I have”

If you’re trying to bulk up your credit score, you might be thinking “The more credit I get, the better my score...right?” Wrong! Lenders don’t necessarily view having lots of credit as a good thing.

High amounts of credit on your report could indicate that you lack control when it comes to spending. This is a big red flag to lenders, as they might worry that you’ll struggle to keep up with your payments... and if there’s one thing lenders hate, it’s late payments!            

Handy hint: If you’ve been applying for lots of credit, calm it down for a while! Close down those accounts you no longer use and reduce your credit limits where possible.

3) “If I’ve never borrowed before, I’ll have a good credit score”

Whilst lenders aren’t so keen on you using too much credit, they also don’t like it if you’ve never borrowed before… We never said this credit-building business was simple!

If you’ve never borrowed before, lenders have no way of working out how reliable you are at paying off your debts. For all they know, you could have no idea how to manage your money! Lenders tend to prefer reports which show a few well-managed cards or loans.

Handy hint: To start building your credit, you could use a credit building card to make purchases with. If you pay them off straight away, you could see your score rise.

4) “I might be on a credit blacklist”

We’ve all heard about this so-called blacklist. If you’re on it, you can say goodbye to getting that credit you want...

Well, you’ll be pleased to hear that this list doesn’t actually exist. If you’re rejected by one lender, you could still be approved by another. In fact, all lenders follow different lending criteria – ­ some even accept poor credit histories! Just be sure that you’re using eligibility checkers when you apply for credit, so you avoid getting ‘hard-searched’.

Handy hint: To see why lenders might be rejecting you, you can check your credit report to see how your score can be improved.

5) “It makes no difference if I pay my balance in full”

Yep, you’ve guessed it… it’s not true! Lenders like it when you pay your balance in full because it shows that you’re capable of affording what you’ve borrowed. If you only ever pay the minimum amount, they could think that you’re struggling to afford credit.

Lenders offer the most competitive deals to people who have good credit scores – so if you regularly make payments in full, you’ll be spoilt for choice when it comes to credit!  

Handy hint: You can prove that you’re financially responsible by making small, regular purchases on your credit card and paying them in full straight away.

Head over here for some more credit-boosting tips!

 

Disclaimer: All information and links are correct at the time of publishing.

author: Emily

By Emily

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5 Common Credit Myths 5 Common Credit Myths