You are here: Home - Credit Cards & Loans - News -

The top five credit score myths debunked

0
Written by: YourMoney.com
21/10/2022
Credit scores, finances and debt are subjects which leave many Brits confused and with some potentially troubling misconceptions. Here are five myths debunked.

Jonathan Such, of vehicle finance company First Response Finance, said for many people, credit scores can be a “stressful aspect of their personal finances”.

“There are many myths surrounding credit scores, and a lot of people have trouble understanding the different credit options available,” he said.

Below, Such sheds light on five common credit score myths:

1) My credit score is impacted by my income

False. How much money you have isn’t taken into consideration by credit scoring models, and your credit reports don’t have your income on them, so your score can’t be impacted.

Credit scores are based only on information found in your credit report. A change in your income can, however, impact your ability to pay your bills – in this case, any unpaid bills would impact your credit score.

2) I must clear debt to repair my bad credit history

False. Even though repaying debt is a good move, making repayments on existing debt is often the best way to improve bad credit.

Missing payments or paying late can be one of the worst things you can do to your credit score.

3) I don’t need to worry about my credit score until I’m older

False. The sooner you establish credit the better. One of the big factors in your credit score is the length of your credit history. You should start worrying about your credit score sooner rather than later. The minimum age to qualify for a credit card in the majority of situations is 18.

4) I’m less likely to be accepted if I have a low credit score

False. Having a low credit score doesn’t necessarily mean your application won’t be accepted.

Service providers and lenders will also consider other factors, such as past account history and affordability. You may just be offered a more limited amount of credit or higher interest rates.

5) My credit score can be helped by closing a credit card

False. Your total available credit is reduced when you close an unused account, resulting in your credit utilisation going up. Your credit utilisation is a ratio that describes what percentage of the credit available to you that you are actually using.

It’s helpful to know that the majority of people with a low credit rating spend an extra £1,170 each year on items of credit than those with a good credit rating.

This could include mobile phone contracts, loans, utility bills, and credit cards. You can improve your credit rating by understanding what’s on your credit file and then spending less over a typical month or year.

Trying to get your head around your credit score can be confusing, but with the help of financial experts, you can gain a better understanding and chance of being accepted for finance. It’s important to remember that credit is a tool, and what matters is how you use it.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week