Credit scores impact numerous aspects of our lives, yet many myths persist about what does and does not affect them, according to finance experts. Credit card company Aqua has compiled and debunked six common misconceptions.
To improve your credit score, the firm recommends checking your credit report regularly, getting a credit card to build credit history, paying bills on time, staying on top of debt and setting up direct debits.
Sharvan Selvam, Aqua commercial director, said: “It’s important to separate fact from fiction when it comes to credit scores to ensure you take the right steps on your credit journey. Using a reputable source to get your financial information and talking to your bank or credit provider will help you make better financial decisions and find the credit product that is right for you.”
Six popular credit score myths debunked
'I only have a single credit score' – false
Nobody has one single, static credit score. Every credit reference agency uses different metrics and criteria in their calculations.
'Checking my credit score affects my credit rating' – true and false
There are two ways your credit score can be checked.
Soft credit check: An initial look at your credit report that can help you see how successful a credit application may be. This does not impact your credit score.
Hard credit check: A more in-depth credit check used by lenders. This does impact your credit score and remains visible on your credit report for up to two years, but only impacts your credit score for one year.
'Better salary and more savings equals a better credit score' – false
While your income and savings are considered when determining your ability to pay back the amount of money you will borrow, they have no influence at all on your credit score.
'I will get the best deals if I have never borrowed' – false
If you have never borrowed, you are actually more likely to be rejected for the best deals on credit cards, mortgages and loans. There is no way for a lender to see that you will be able to make your payments successfully.
'Repaying my credit cards in full lowers my credit score' – false
Repaying your credit card statement balance in full each month is a great financial move that may increase your credit score. By paying down your balance, you can lower your credit utilisation, which is better for your credit score.
'My credit rating is horrible, but the damage is done and there is nothing I can do about it' – false
It might take time but there are some simple steps you can take to affect your credit score positively. These include registering to vote or closing down accounts you do not use.
