x

close ad

5 myths that could destroy your credit rating

Do you want to follow this topic? You need to be signed in for this feature

On 24 September 2010


|

12 Comments
Do you want to save this article to read later? You need to be signed in for this feature

Emma Roberts unveils the 5 biggest credit rating myths that could destroy your finances and looks at how to beat them.


Having a good credit rating can be the key to financial success but with so many myths surrounding what affects your credit score, it can all get a bit confusing. Emma Roberts unveils the 5 biggest credit rating myths that could destroy your finances and how to beat them.

We all want to have a great credit rating. After all, having a good score really boosts your chances of borrowing money, getting a mortgage and even taking out a mobile phone contract.

But how much do we really know about what affects our credit rating? I’m going to take to the streets to find out.

Myth 1: If the people who you live with have a bad credit rating, this will drag your credit rating down too.

Most of the people we interviewed in our vox pop video (above) believed this myth.

But there’s no point even trying to place the blame for your bad credit rating on the occupants of your home. If you live with someone but you don’t have any joint bills or accounts with them, they cannot affect your credit score.

This is because your credit rating is attached to you and not your property.

Myth 2: No one else can affect your own credit rating.

Most the people we interviewed believed that other people could affect your credit rating - but were not sure why.

The fact is, if you’re financially associated with someone, then their financial actions can have a direct impact on your credit rating.

For example, if you and your partner open a joint bank account or get a mortgage together, you become financially associated. This means that if your partner has a bad credit score, it will bring down your own chances of getting credit.

Myth 3: A spotless credit record means that credit will be easy to come by.

One of the people we interviewed thought this was the case, but most were more suspicious, although again they did not know why lenders would reject someone with a perfect credit history.

The reason is because lenders won’t only look at your credit record. They will also look at whether you are on the electoral roll. If you’re not on there, they cannot easily confirm your identity and your address, and therefore are likely to turn you down for credit.

Make sure you are registered to vote before you apply for credit. It’s free to do and you can register at any time throughout the year. Find out more on the Electoral Commission website.

Myth 4: It doesn’t affect your credit rating to have credit cards in your wallet that you don’t use.

Many of the people we interviewed believed this myth.

The truth is, lenders use your credit report to find out how much money you have access to. So even if you’re not using a credit card at the moment, you could find it affects your credit rating because lenders know you could start spending again on the card whenever you want to. That’s why it’s best to cancel any cards you’re not using before applying for more credit.

Myth 5: Lenders all share a black-list, which contains the names of all the people with bad credit scores.

We found that most people believed this myth, but thought it was 'unofficial'.

But the notorious credit-rating black-list is a complete myth. So if you mess up, it's not like you will get put on a certain list, and that's it, no one will lend to you for the rest of your life. Each institution assesses you independently when you apply for credit - although lenders do share information about you via your credit report.

Don't freak out about this. The important thing to remember is that banks and lenders aim to make money. They all have a ‘perfect customer’ in mind and if you don’t match up to this criteria, you’re likely to be refused.

Don’t let a bad credit score ruin your next application for credit! Check it online and correct any errors. Go to lovemoney.com/creditreport to get access today for free on a 30-day trial, but make sure you remember to cancel before the trial period is over. Alternatively, get a report for £2 online from any of the major credit reference agencies: Experian, Equifax or CallCredit.

Comments (12)

Do you want to comment on this article? You need to be signed in for this feature

Comments



Close

Advertisement