Top 6 Credit Score Myths Debunked

By Angela Monroe - December 14, 2018

Do you know what your credit score is? If you’re concerned about bad credit, it’s good to understand exactly where you stand. Unfortunately, there’s a lot of misleading information out there and it’s easy to get worried about credit score myths, which are in fact – simply myths.

At Loans for People With Bad Credit, we want to help you to understand the ins and outs of your credit score and how it can affect your ability to borrow money.

Understanding your credit score

Before we start to look at some of the common credit score myths, it’s useful for you to do a credit check. This is free, quick and easy – it’ll take moments of your time but prove really useful when it comes to understanding whether you have bad credit.

It’s also useful for you to get an idea of the type of loan that you might want to take out – whatever your credit rating. From personal loans to car loans, Loans for People With Bad Credit can help you with our years of experience and access to a range of bad credit lenders.

Top 6 credit score myths (and the truth behind them)

  • Checking my credit rating will affect my credit score To understand this myth, you need to understand the difference between the two types of enquiry below: Checking my credit rating will affect my credit scoreTo understand this myth, you need to understand the difference between the two types of enquiry below:
    • ‘soft enquiry’ – you checking your credit score with one of the named credit bureaus. This doesn’t affect your credit rating.
    • ‘hard enquiry’ – you have made a request for an external party to check your credit score (usually through an application for credit). This does affect your credit score.

Whereas there’s no problem with checking your credit rating (you can do this for free on an annual basis), you do need to avoid making numerous applications for credit – especially in a short space of time.

  • A credit card will help my credit score If used in the right way, having a credit card can help to build up your credit history, show evidence of responsible borrowing and help to improve your credit score. It’s really important though that you don’t overspend on a credit card – only ever spend what you can afford to pay back. Even more importantly, make sure any repayments are made in full and on time each month. Having a credit card but not paying it back on time will actually damage your credit score.
  • I can close a credit card and erase it from my credit history Many people find themselves in a situation where they have multiple credit cards and may have large amounts owing on them. Whilst it’s good to ensure that these are paid off and that you close the card if you no longer use it, you can not expect the history to be erased immediately.

Generally, if you have black marks on your credit file from poor use of your credit card (such as late or missed repayments) these will stay on your credit file for up to 10 years – whether or not you close the credit card account.

  • It’s quick and easy to increase my credit scoreSadly this isn’t completely true. Your credit score is a result of your credit history, which builds up over your entire financial ‘career’. You’ll need to take time investing in your credit history – building up evidence of paying back loans on time and in full and showing yourself as a responsible lender.

Don’t be disillusioned though if you want to improve your credit score – it’s certainly possible and just doing a credit check and understanding exactly what’s involved in your credit report can help you identify areas that can be worked on immediately.

  • My age, race and sex will affect my credit scoreThis is not true. There is set information that is used when calculating your credit score and age, race and sex are not taken into account. This is often confused with some loans such as new car loans, which are occasionally higher for younger people or for either sex.
  • I’ve never been in debt so I must have a good credit scoreNot being in debt is certainly a good thing. But you need to be able to show a lender evidence of previous borrowing in order to reassure them that you’re a responsible borrower and able to pay back loans. If you’ve never been in debt because you’ve never borrowed any money before, this could actually affect your credit score.

Borrowing responsibly helps to build up your credit score so it’s really debt that you want to avoid rather than borrowing itself if you’re looking to get a good credit score.

Ask for help

Loans for People With Bad Credit has years of experience working with people to help them understand their credit score and find the best bad credit loans for them. If you’re feeling overwhelmed or unsure about your credit score, make sure you contact us to let us help you through the process.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

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