Your credit score is important because it determines whether you are likely to qualify for a credit product like a loan or credit card. A good credit score gives you more options and financial freedom. If you suffer from a bad credit score, then don’t worry because improving it is more than possible. But, the reason why so many choose not to is because of all misleading information and credit myths out there. There are many companies that specialise in bad credit products such as guarantor loans and even bad credit car leasing. But, this doesn’t mean that you shouldn’t always be looking at ways to improve it. Let’s take a look at the biggest credit score myths, so you know what to look out for.
A Missed Payment Remains on Your File
A lot of people worry that a missing payment can stay on their credit score forever, but most payments are removed after a certain period. However, missed payments can stay on a credit score for up to 6 years. Don’t let this worry you, the older a missed payment is, the less it’s likely to matter. Credit lenders are far more interested in recent information, so if you did miss a payment a couple of years ago, it isn’t going to necessarily stop you from securing a product.
Criminal Offences Harm Your Credit Score
Details of criminal offences and convictions are not included in a credit score and therefore does not affect it. However, a County Court Judgement or bankruptcy will significantly bring down a score. With this being said, credit lenders are allowed to ask people about their criminal offences and can take this into consideration when making a decision.
Unpaid Student Loans Can Cause Issues
There are many graduates out there that believe unpaid student loans affect their credit score. They have no influence over a credit score because they are paid back through a salary and only paid back if graduates earn enough money to take them over a threshold. However, if students took out any overdrafts or credit cards to support their college or university days, these will show up on a credit score.
There is A Credit Blacklist
Believe it or not, most people believe that there is credit blacklist that warns lenders that they are risky borrowers. You might read on the internet that the credit industry talks about blacklisting people after they have had a few unsuccessful credit applications, but there is no such thing. And, there is no single score that lenders rely on. The truth is that each lender will use its own criteria to assess applications with a credit score being just one of many different factors. So, while one company may reject an application, another could accept it.
The Credit Reference Agencies Have a Say
Many people believe that credit reference agencies decide whether an application is accepted or not. But, that couldn’t be even more incorrect. Credit reference agencies have no influence over the decision making process. They are just huge information libraries which draw data from public bodies and lenders to build consumers’ credit profiles. The information is then given to lenders when credit applications are made.
Your Partner’s Finances Affect Your Score
Credit lenders won’t look at your partner’s credit score just because you are living together or married. But, if you are your partner are financially connected (such as a joint account or mortgage), lenders might look at their score when you make a credit application. This can also be applicable even if you are not in a relationship. For example, if you have a joint bank account with a friend who you share a flat with. So, you need to think extremely carefully before opening joint accounts and ensure that you close them when they are no longer required.
Checking Your Credit Score
In the UK, there are 3 main credit reference agencies (TransUnion, Equifax and Experian) and they all allow you to look at your credit score for free. Its good practice to check your credit score at least 3 times a year because incorrect information can have an adverse effect on your score. If you see a mistake, then get in contact with the credit reference agency you used and ask them to amend it.