Credit Score Myths Debunked

Our credit score is essentially our license to spend and borrow money. But few us really understand what makes a good credit score or what makes a bad credit score. This has led to many myths being developed. Here we look at these myths and determine which ones are true and which ones are false. 

Your credit score is an actual number

FALSE. A credit score isn’t a fixed grade from 1 to 10 as some of us believe. In fact, when lenders or creditors check our score, they’re simply getting information based on a variety of sources, which then leads them to make their own decision based on the materials available. Because of this your credit score can change depending on the person who checks it. It’s all up to how trusting that person is, and some people may be more trusting than others.

You can’t get loans with bad credit

FALSE. As already mentioned, some lenders are willing to take the risk with low credit score holders. In fact, there are certain installment loans out there that are specifically catered to people with a low credit rating. If you have a low score, target these specific lenders and ignore all others – every time you are rejected a loan this goes on record in your credit history for other lenders to see, and too many rejections could start to put off even the most trusting of lenders.

No credit history can be just as much of an obstacle as a bad credit history

TRUE. Without any history of borrowing, lenders are unable to tell how trustworthy you are. It’s for this reason that banks recommend taking out a credit card and buying small items on it, simply to have some form of credit history.

Getting on the electoral register will improve your score

TRUE. A good credit score isn’t all about how good you are at paying off debts. Hints of fraud can also make lenders wary when checking your credit rating. This could involve having two bank accounts signed to different names, or two bank accounts registered to different addresses. Fraudsters may also often avoid going on the electoral register as this is used for criminal investigations and has details such as your current address and date of birth. Not being on the electoral register, even if you don’t ever plan to vote, could imply to a lender that you are trying to act under the radar and that you could be about to run off to Mexico with any money they lend you.

Your credit history stays with you for life

FALSE. All your early debts and bad decisions involving pay day loans will generally be wiped from records – but not until after six years. This means that by being a good borrower and spender for six years, you could erase any trace of a bad credit history.