There’s so many things that people will tell you about your credit report, especially when you’re worried about it. They think they’re being helpful, but more often than not they’re giving you the wrong information; you should check here before taking any of it as gospel.
Here are seven of the most common misconceptions about credit ratings cleared up to set you on the right track and help you take control.
A poor credit history will land you on a blacklist
There is no such thing as a credit blacklist. There really isn’t. This is one of the most stubborn credit myths; the truth is there’s no one central score, list (black or otherwise) that lenders use to assess you.
Lenders actually use their own criteria to assess your application and while most will be broadly similar, one lender may reject you while another won’t.
It’s the credit reference agencies that decide on your applications
The credit reference agencies (CRAs) just send information to lenders who then use it to decide on your applications. Lenders also use the other information you supply, such as job status and so on, to make their decision.
Your credit applications will be more successful if you’ve never had credit
Having no credit history means lenders can’t see how you handle it. If they can’t see whether you pay back loans and pay off your credit card every month, they can’t make a fair assessment. This applies even if you’re pretty well-off.
A good solution here is to take out a credit-builder card, then use it for small purchases and pay the bill every month.
Every missed payment stays on your credit report indefinitely
A lot of the information on your credit report is removed after a number of years. Things like missed or late payments stay on your report for up to six years after you’ve defaulted or paid off the debt. However, lenders place more weight on recent activity, so a bad patch five years ago followed by years of prompt payments may well be overlooked.
All the CRAs have the same information on you
Lenders send information to all the big three CRAs, usually at the end of each month, but nowadays they’re moving towards using slightly different versions. This is because of the growing amount of personal data on a credit report and the concerns surrounding it.
If you’re always checking your credit report, you’ll damage your rating
You can check your report as often as you like with no adverse effects. In fact, it’s a good idea to check it regularly – every month or quarter – so you can pick up any errors or even fraudulent activity.
If there are any errors or suspicious activity on your report, you can deal with it immediately to prevent your rating dropping and you being rejected for credit unnecessarily. Even if you don’t check your report every month, you should look at it before you apply for a new card, a loan or a mortgage, just to be sure.
Your credit rating can be affected by the people you live with
This is only the case if you have a financial connection with another person and you don’t necessarily have to live with them. If you have a joint loan or mortgage with someone then lenders will probably look at their report as well as yours. This is because their financial situation could have an impact on your ability to make repayments.