A credit score is the numerical value in your credit score which reflects the level and status of your credit management. As with most financial products, there are often myths that can cause credit scores and reports to be something of an enigma. However, a lack of understanding of a credit score can be detrimental to applying for credit in the future.
Below are some common credit myths, debunked, to help you understand credit scores better.
– Checking your report too often will hurt your score
Not true, the only effect that reviewing your report will have is being listed on your report. It is known as a ‘soft pull’ or ‘soft inquiry’ which means that it will be seen on the report. It has no impact on your score. In fact, it is advised that you review it at least once a year to prove to a lender that you are apt at checking your report regularly.
– Paying cash is the only way to improve your credit score
A credit score is only affected by your use of credit, rather than cash. Debit cards will have no effect on your score as it is only using your own money. Using a credit card is the only way to build a credit reference. The only way to build up a good credit history is by using credit responsibly and paying it on in time according to the agreements made when applying.
– Your employment history has an effect on your score
Your employment history will be detailed on your reports, but it has no impact on your score. Lenders will only use it to see if you are stable enough to repay credits or loans, if you are frequently changing jobs, it may have an effect on the lender’s decision.
– Applying for credit will not hurt your score
Applying for too much credit in a short space of time can have an effect on your score, especially if you have had numerous rejections. Lenders will see this as a form of being desperate for credit and come to the conclusion that you are not capable of managing debt.
– Bad credit scores cannot be fixed
This cannot be further from the truth. A credit score can be improved, but the longer you leave it, the longer it will stay in the negative. It is simple to improve and can be done through secured credit cards, making payments on time. It is hard work, but can greatly improve your chances to get accepted for credit in the future.
– Being turned down once will bring my rating down
This myth is a bit tricky. It can have an effect on your rating, but it is not a huge impact and it does not reflect your ability to be accepted in the future. Most lenders have a set criteria for giving credit and you may find you do not fit that criteria, but as mentioned previously, repeated attempts in a short space of time will have an effect.
Credit scores can be tricky to understand, but the key thing to remember is that a score does not reflect you as a person and no matter how bad it is, it can be repaired. You should always check your credit report on a regular basis before applying to see if you should improve your score and to see the status. Many credit report providers can give you a detailed account of your history as well as ways to improve your rating.
Bill turner is a fulltime writer from the south coast, whoin his spare time spends hours running, mainly training for the many marathons he takes part in.