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10 astonishing lies about credit ratings

lovemoney staff
by Lovemoney Staff lovemoney staff on 14 April 2012  |  Comments 19 comments

Credit records can seem a bit confusing. Here, we expose the truth about 10 credit rating myths!

10 astonishing lies about credit ratings

If you’ve ever applied for any type of credit – whether that’s a loan, mortgage or credit card – you’ll know all about the importance of having a good credit record. After all, if your credit record is squeaky clean, you’re more likely to get a better interest rate on the product you’re applying for. And if your credit rating is not up to scratch, it's likely that your application will be rejected.

However, credit ratings can prove to be a tad confusing and it’s not always clear exactly what affects it – in other words, what can have a negative impact on it, and what can help to improve it. So here, we're going to shed some light on the 10 biggest credit rating lies.

Checking my credit report will damage my credit rating

That's a lie! Checking your credit rating on a regular basis is a very sensible option and you don’t need to worry about leaving any ‘footprints’ behind if you do this. Because quite simply, you won’t. And this means checking your credit report won’t reduce your chances of being accepted for credit.

Checking your credit rating doesn’t have to cost a lot either. In fact, you can sign up for a free trial of your credit report from Experian. Just remember to cancel your membership before the 30-day trial period is up, to avoid being charged in the future.

Alternatively, you should be able to pick up a copy of your credit report for £2.

There’s a credit blacklist

That's a lie! There’s no such thing as a credit blacklist. Many people believe that somewhere there’s a list of people who should never be lent money – ever.

But this isn’t true. Credit agencies don’t decide your credit rating – whether or not you can borrow money is up to the lender involved, and some will say yes when others will say no. They simply look at the information on a credit report and then decide whether they will lend money or not.

Credit reference agencies only hold factual information and they don’t rule out whole geographical areas. They also don’t take into account your gender, race, political beliefs, or religion when you’re applying for credit.

My credit rating could be affected by the previous home owners

That's a lie! If the people who previously owned your home were in mountains of debt, your credit record will not be impacted. Lenders only carry out credit checks on individuals, not addresses. This means the lender will only see information about you.

Your record follows you to your address, and the previous occupants take theirs along with them.

My credit rating could be affected by who I live with

That's a lie!  Similarly, those who live with you have no impact on your credit report – unless you are financially linked to them. So, for example, if you share a mortgage or bank account with someone, your credit history will be connected. This is the case even if you don't live at the same address.

However, if there are no financial ties, your flatmates’ credit records will not affect yours.

If I get refused credit, it will show up on my report

That's a lie! Credit agencies won’t be told whether you have been accepted or refused for credit, so this won’t be recorded on your credit report.

The fact that a lender looked at your credit record (with your permission) will be recorded and this ‘footprint’ will show the date of the credit check, the name of the organisation you applied to, and the type of credit you applied for. But it won’t show how successful your application was.

I only have one credit rating

That's a lie! You don’t have a single credit score or credit rating. Lenders use their own equations for working out a credit score and this differs between banks and between types of products. So you could have one score for a credit card application and a completely different one for a loan application, for example.

Lenders’ scoring systems can vary widely, giving points to all of the different aspects of information on your report and your application. This scoring system is based on how you’ve handled credit in the past, as well as on information about your situation and whether or not you can afford the credit you've applied for.

I’ve never applied for credit so my credit record is perfect

That's a lie! You wouldn’t be alone in thinking that if you’ve never had to apply for credit, your credit rating will be spotless and lenders will be jumping at the chance to let you borrow money. However, lenders actually prefer to see a record of promptly repaid debt as this shows you can manage your borrowings well. Well-managed debt will show up on your credit report, but your long-term in-credit banking history will not.

So if there’s no record that you’ve been able to borrow and pay money back on time, you may get turned down.

Having dormant accounts won’t affect my credit rating

That's a lie!  If you have a lot of unused credit on several accounts it makes sense to close some of them down, or ask for lower credit limits. This is likely to decrease lenders’ concerns that you could max out on all of this available credit and get into difficulties.

What’s more, having a lot of dormant accounts exposes you to fraud risk because you’re unlikely to notice if someone is using a credit card you haven't touched for months.

That said, some lenders will also look at your income when assessing affordability and if they see you can easily manage several credit products, they are unlikely to be concerned. However, if you’ve maxed out all your credit cards and you’re now applying for more credit, you may look desperate, and as a result, some lenders will be put off.

Overall, you’re better off keeping your borrowing to well within what you can afford and below your borrowing limits. You should also avoid excessive unused credit, and close dormant accounts.

Switching current accounts will affect my credit rating

That's a lie! When applying for a current account some lenders will ask how long you’ve been with your bank and build stability indicators such as this into their credit scoring. Some lenders may also ask you about how long you’ve been at your current address and in your job.

However, these are small factors and your credit scoring will take a whole range of other things into account. As a result, any impact of switching current accounts is likely to be very very small. So don’t let that stop you finding a better account!

Bad credit ratings are for life

That's a lie!  Generally, bad credit will stay on your personal credit file for about six years.

It is possible to rebuild your credit rating, so don’t think there’s nothing you can do about it. For a start, you should make sure you’re on the electoral roll. It’s also important to try and clear as much of your debt as possible and try not to max out on your credit. Finally, don’t ask for more credit than you can afford and don’t make multiple applications over a short period of time. 

For further tips, read Improve your credit score: The quick dos and don'ts.

Just be aware of any company claiming it can repair your creditworthiness or remove debts from your credit report for a fee – these can often be very expensive and in return, you’ll get very little or no advice. So don’t fall for this.

If you are struggling with your finances, you can get good advice absolutely free! Read Where to get free debt advice for more information.

Don’t forget, if you're curious to know more about your credit rating, you can get a free credit report via lovemoney.com to help you work out exactly where you stand. Good luck.

This is a classic lovemoney article that has been updated

More on credit ratings:
How to improve your credit rating

What REALLY damages your credit rating

How to build an excellent credit history

More: 10 steps to a perfect credit record | 5 tricks to boost your credit rating

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Comments (19)

  • cassiano
    Love rating 0
    cassiano said

    Very good, thanks!

    Report on 13 June 2010  |  Love thisLove  0 loves
  • Cheshire Cat
    Love rating 8
    Cheshire Cat said

    Double check point 4 - when my brother asked to be sent his credit report he also received mine and my parents', because we all had the same surname and lived at the same address. But none of us shared any accounts or financial commitments with my brother.

    Report on 13 June 2010  |  Love thisLove  0 loves
  • pamjoss
    Love rating 1
    pamjoss said

    Couple of thoughts ;

     point 3 - people who lived at your home before you, whilst this does not impact your score/rating by using the same address, be sure to check your file for a year after moving out of a property. My brother's previous address was rented to the new tenant when he moved to buy his first flat. Automatic mailings from catalogues and credit cards continued to go there and unknown to him, applications were completed (pre-filled type, typically capital one card) with a guessed date of birth and accepted. by the time he applied for finance to change his car 2 yrs later and was refused due to his credit history, he had 4 delinquent accounts up to £8000 in his name! Clever tenants had bought small value items on a catalogue account and paid it quickly then escalated the size of the purchases and balances gradually.

    So, be careful of what goes after you if not what went before?

    Point 6 -Whilst lenders cannot see the decision reached when you applied, they can see you applied for a loan and a mortgage 3 months ago and neither appear now as a live account, ie you withdrew or were declined? Several entries like this may make a lender nervous.

    Report on 13 June 2010  |  Love thisLove  1 love
  • semplemac
    Love rating 3
    semplemac said

    The problem of items being delivered after you have left your old address is easily solved by paying for a 12month re-direction of mail. This would mean anything with your name being addressed to the old address would forwarded on to the new address. The money spent would be well worth it to avoid the situation pamjoss' brother ended up in.

    Report on 13 June 2010  |  Love thisLove  0 loves
  • whypayinterest
    Love rating 0
    whypayinterest said

    I disagree about the current account and address!

    When I moved house I had a very good job and an excellent credit rating I had never been refused a credit card and always got very high credit limits. However I took out an offset morgage which meant I had to change current accounts. Halifax then REFUSED me a card. When pressed they said it was because I moved house and current account at the same time! They finally gave me a card but with a limit far lower that I was used to!

    Be warned!

    Report on 14 June 2010  |  Love thisLove  0 loves
  • Stargazer
    Love rating 11
    Stargazer said

    As Cheshire Cat says, look out for point 4. You may not be financially linked to someone else living in the same house and your credit report shouldn't presume a connection, but the reader of the report may think differently.

    In my case I nearly got turned down for a mortgage application because of the poor credit history of a former lodger.

    Report on 14 June 2010  |  Love thisLove  0 loves
  • culluding-fool
    Love rating 60
    culluding-fool said

    Point 4 again, and I know this could just be a strange coincidence. When I was married I couldn't get a credit card & the only company willing to give credit was Providian at some extortionate interest rate. I couldn't even get a mobile broadband contract. I only had two common accounts with my wife, a hardly used savings account and a mortgage which was always paid on time. My wife did have a terrible credit record of her own though. About 6 months after I left her I managed to get a mobie broadband contract and one of those low credit limit credit cards designed for people trying to sort their credit rating out. Oh, I also had 3 catalogue accounts from when I just moved into a place of my own (I had to furnish it!) and I always paid more than I needed to & kept them up to date. A year and a half after leaving my wife and my bank (HSBC) offered me a credit card with a decent credit limit. At the time I needed the credit & used it, but now I have paid off the catalogues and am in the process of clearing the credit cards. The only possible reasons I can think of for my not getting credit before is either the address I was living at (point 3) or the person I was living with (point 4). Maybe there's another reason I can't think of...

    Report on 14 June 2010  |  Love thisLove  0 loves
  • Stargazer
    Love rating 11
    Stargazer said

    culluding-fool - if you had any kind of joint finances (mortgage or joint account) with your ex-wife you will be considered as being financially linked to her - and it may take effort to get the credit reference agencies to remove the connections on your credit report.

    I think I should add an obvious lie #11 to the list - your credit report is always to be believed! A large proportion of credit reports (possibly even most of them) contain inaccuracies - in my case I found a linked address that I'd never heard of that had been added by a mail order catalogue, and I've never shopped from a catalogue in my life. Got it removed eventually, and it doesn't seem to have been problematic. But how many millions of people out there have inaccuracies on their credit reports that are disadvantaging them, I wonder?

    Report on 15 June 2010  |  Love thisLove  0 loves
  • yoshi
    Love rating 0
    yoshi said

    Excellent!

    Report on 28 June 2010  |  Love thisLove  0 loves
  • jenc
    Love rating 1
    jenc said

    Re having mail forwarded to stop goods being ordered in your name. recently my husband receeived a final demand form a catalogue for 2 mobile phones (on different networks) ordered at the same time. he has never used a catalogue in his life and we have lived in the same house for 25 years. Apparently the goods were signed for when ~i was actually in the house by someone lurking in our garden. The application had the wrong date of birth as well as the wrong signature, and finally we were believed.

    Report on 11 September 2010  |  Love thisLove  0 loves
  • maarkyboy
    Love rating 10
    maarkyboy said

    DONT FORGET... If you have any credit buiding/credit repair cards such as Vanquis many lenders won't touch you. It's a flag that you are not yet creditworthy.

    Report on 18 October 2010  |  Love thisLove  0 loves
  • amreilly
    Love rating 0
    amreilly said

    People you live with: I lived in a flat and the man upstairs had a similar name to me and a bad credit record. Credit scoring agencies automatically linked us, assuming from the name we were related.

    In another home, I took a lodger. He made several hooky credit applications from my address and I ended up with a CIFAS note on my credit report. This didn't stop me getting credit but it meant that any credit applications of mine took months rather than minutes/hours to decide. This CIFAS note stayed on my credit report for a year.

    Finally, in my first shared flat as a teenager, I ordered a catalogue which was nicked by the neighbour across the hall who ordered hundreds of pounds of stuff in my name. The signature on the delivery note was not mine but the catalogue company would hear none of it. Eventually my case was dealt with by CID as it was fraud!

    Report on 18 October 2010  |  Love thisLove  0 loves
  • Jim McKenna
    Love rating 0
    Jim McKenna said

    You use the terms 'credit report' and 'credit rating' as though they are different.

    Checking on your suggested site, Experian, reveals that the term 'credit rating' is misleading. All they offer up front is a report of your credit agreements.

    Jim McKenna

    Report on 29 April 2012  |  Love thisLove  0 loves
  • naednhoj
    Love rating 6
    naednhoj said

    If you apply for a Experian credit check, read the privacy policy first. I think it stinks for a financial company.

    They defend "targetted advertising" by other parties as a good thing offering consumers goods they want. What Bulls**t!

    So perhaps Experian can refute that not only is it possible they hold incorrect information about you, charge you for checking it, make it your responsibility to prove them incorrect and make money out of flogging these possibly incorrect details with what seems impunity to businesses and advertisers.

    I think we need government protection from such companies. In my trade, if we get something wrong, we apologise, put it right and refund any damages.

    Can I ask any legal eagles if they do hold incorrect information and distribute it can you sue them for defamation?

    Perhaps Lovemoney can ask Experian to review the above and to correct any wrong assertions ? At least I am not charging them for the invite!

    Report on 29 April 2012  |  Love thisLove  1 love
  • James Jones Experian
    Love rating 0
    James Jones Experian said

    Happy to provide assurance that the information we collect, when you apply for your credit report, is not shared with third parties, unless you provide specific consent for this at a later stage. Otherwise, we use the information simply to prepare your credit report and to manage future communications between us.

    Access to your credit report is very strictly controlled and this information cannot be used to target marketing offers.

    naednhoj - if you have a specific issue with your credit report please contact us so we can help.

    Thanks

    James, Experian

    Report on 30 April 2012  |  Love thisLove  0 loves
  • charles125
    Love rating 53
    charles125 said

    There are other credit checks for example for energy companies, installments for car insurance, taking up a mobile phone contract, changing your landline telephone provider and suchlike.

    You can have an appalling credit card rating yet have no problem setting up an account for a mobile phone etc, or to pay your car insurance by installments, if for instance you have a previous good payment record for bills. .

    These depend on a variety of factors, such as time at present address, previous employment history, partner's occupation, payment record with utility companies/other mobile phone companies, and having and maintaining a landline telephone. In fact your worthiness for a loan will hardly be taken into account, unless you have few previous good payment records, and recent changes of address!

    Report on 04 May 2012  |  Love thisLove  0 loves
  • charles125
    Love rating 53
    charles125 said

    PS it's www.noddle.co.uk not .com as someone else has written, to get your free fully comprehensive - full credit rating!

    Very handy, you can check balances and payment records going back up to several years for all of your card accounts, bank loans, mobile contracts and insurance payments by installment! And of course check present balances and most recent payments! It also shows anyone you are linked with a financial connection to.

    It also allows you to see which companies/who else have/has checked your credit record,when and why!

    As well as giving your rating as a score out of 5, it allows you to query any entries you think are incorrect, and to inform about changes that are not recorded. Everyone should check their report entirely for free through Noddle, as it allows checking for errors, mistakes and unknown and possibly unwanted entries on your credit report. best of all The service paid for through marketing - but you can uncheck both boxes to not have offers sent to you by 3rd party companies or Noddle themselves, if you wish.

    This is a must read actual report based on your genuine financial dealings, and though you have to enter valid card details for one current card to verify your details, the service is genuinely and completely free! It is not a trial such as by Experian, but always free!

    Report on 04 May 2012  |  Love thisLove  0 loves
  • charles125
    Love rating 53
    charles125 said

    Also recommend signing for free account at noddle.co.uk, before any one else uses your card details to take a peek, as once you have an account, no one else can view your credit record via Noddle!

    Report on 05 May 2012  |  Love thisLove  0 loves
  • tuttogallo
    Love rating 99
    tuttogallo said

    It's a very strange thing, but:

    Those who need to borrow money often should not be lent money because they don't have the money to pay the loan back (or else why borrow in the first place?).

    On the other hand the people who are financially sound enough to be attractive to lend money to probably don't need to borrow!!

    A gross over simplification, but there is a grain of truth in this. I have already bored people on this site with my definitions of good and bad debt.

    Report on 06 May 2012  |  Love thisLove  0 loves

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