Seven credit rating myths

Don’t be fooled by common misconceptions about your credit rating.

We’re constantly told about the benefits of checking our credit report. It could help us spot identity theft, correct mistakes on our file, assess our chances of getting a mortgage – to name but a few.

While these points are all true, there are a number of myths and misconceptions. We explain the truth behind seven of the most common.

MYTH ONE: Checking your own credit report damages your score

FACT: Your credit score will only be affected if your file is checked by a potential lender.

If your file is frequently checked by credit card companies, this could mean you are having financial difficulties.

MYTH TWO: I’m on a credit card blacklist

FACT: There is no industry wide ‘naughty list’ of people who can’t borrow money or get a credit card.

Most companies will look at similar criteria when assessing your application. However, they have different rules when deciding whether or not to lend you money. Being rejected by one company doesn’t automatically mean you will be declined every time you apply for credit.

MYTH THREE: My flatmates’ debt will lower my score

FACT: Unless you have financial ties with somebody (i.e. a joint account), this person cannot affect your own credit history – even if you live together.

Don’t stress if your housemate has racked up thousands on store cards, that’s his or her problem.

MYTH FOUR: Being a high earner means a high score

FACT: Although you may be asked your salary details when applying for a credit card or loan, your earnings do not affect your score.

However much you make, your score may be low if you have a history of debt and financial mismanagement.

MYTH FIVE: A criminal record affects my rating

FACT: Past offenses will not appear on your credit file – unless the crime was of a financial nature.

Your file will note if you have been declared bankrupt or have a county court judgement (CCJ). However, potential lenders will not be able to see if you have had any parking or driving fines.

MYTH SIX: Bad credit stays with you for life

FACT: The good news is that bad credit does have a shelf life.

While a bankruptcy is recorded for six years, it may only take a few months to clean up your report if your offenses are relatively minor (such as not being on the electoral roll).

MYTH SEVEN: You can be fired for bad credit

FACT: Although an employer may ask to check your credit report for proof of financial stability, the company will need your consent to do so.

If you are worried that your credit rating could affect your job, you might want to check the terms of your employment contract or seek professional debt advice.

**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**

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