Credit ratings and reports are complete minefields with so much incorrect information available. Whether you are looking to take out credit or trying to repay debts it is important you understand your credit report and how it works.
This blogs explores credit rating and credit report myths and we try our best to dispel them.
- The people who I live with could affect my credit rating. The people you live with will only affect your credit rating if you have joint loans or mortgages with them. If the people you live with have a poor credit history it will only affect them
- Previous occupiers of my home could affect my credit rating. Similar to myth one, previous occupiers of your home, who may have had a bad credit rating, will not have any influence or effect on your credit rating.
- Only loans, credit cards and mortgage appear on my credit report. It is often thought that only loans, credit card and mortgages will appear on your credit report. In actual fact all types of borrowing are listed, including mobile phone contracts. If you miss payments against your mobile phone or a utility bill this will be recorded on your credit report.
- Keeping my old credit card accounts open won’t affect me. Although paying off all your credit cards is good, leaving your accounts open when applying for further credit may prove difficult. The main reason for this is that you have more credit available at your disposal meaning that you have the potential to get into trouble financially.
- Having never borrowed, my credit report will be 100%. If you have previously not borrowed either with a credit card or a loan then you have nothing on your credit report to indicate to potential lenders your ability to repay. This could have a negative impact on your chances of getting a credit card, loan or even a mortgage.
- A Debt Management Plan will ruin my credit report. A DMP itself will not be registered on your credit report and will therefore not affect it directly. However, as soon as you start missing payments or making reduced payments, which you can do with a DMP, you are at risk of having a default notices issued on your account. A default notice will be recorded on your credit report for six years from the date of issue. (will link to default notice accounts)
- All credit reports are the same. There are three main agencies that you can go to in order to obtain your credit report and credit score. These agencies are Experian, Equifax and Call Credit. They all use different scoring methods and will therefore give you a different score. They will also update their records at different rates.
- I have been blacklisted. There is no such thing as a credit blacklist. If you have been refused credit this will be due to the lender viewing you as an unsuitable borrower and would reject your application on the basis of your credit report plus their internal criteria.
- A bad credit score will mean I won’t get credit. This isn’t necessarily true, however if you have a poor credit history then you may find it more difficult to obtain further credit. If you do obtain credit then you may find you get charged a higher rate of interest.
- If I enter into an Individual Voluntary Arrangement or go bankrupt I won’t be able to get credit again. An IVA or bankruptcy will be noted on your credit report and will remain on there for six years from the day you’re approved. During these six years you will find it extremely difficult to obtain any type of credit. Once the six years have passed and the note removed from your credit report, you will effectively have a clean sheet and will start again.
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