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15 Credit Myths Busted (the Truth About Credit Ratings)

Credit Myths vs Facts

4 November 2019


Here are our top fifteen credit myths and the truth behind them.


Myth 1 | You only have one credit score

A universal or single credit score does not exist.

There are multiple credit reference agencies, and each has different ways of formulating a score.

Every lender uses its own methods to calculate credit scores and some even use a different formula for different products, such as loans and credit cards. 

So your credit score can change depending on the product you apply for, the lender you apply to, and the credit reference agency.

Read more: Credit Score Bands by Credit Reference Agency [Infographic]


Myth 2 | Previous occupants of my address affect my credit rating

It makes no difference to your credit rating if the previous owner or tenant of your home was a millionaire or a bankrupt.  The only way it could affect your credit rating is if you had a financial product with them, such as a joint loan.


Myth 3 | Checking my credit score affects my credit rating

When you check your own credit report the resulting inquiry will not affect your score.  Checking your report regularly is a good thing – a useful way of ensuring all the information is correct and understanding factors that may help improve your score.


Myth 4 | Credit reference agencies help make lending decisions

Credit reference agencies only compile and hold your credit report, they have no involvement in lending decisions.

Lenders use data held by Credit Reference Agencies to help make lending decisions using their own methods to score your application.  


Myth 5 | Friends and family living at my home affect my credit rating

Sharing your home with a partner, family or friends has no bearing on your credit rating.  The only way they could have an impact on your credit rating is if you have a joint financial product with them such as a mortgage.

If you do have a joint account with someone you share your home with their name will be listed in your credit report under financial associations. When you apply for new credit, lenders may see your financial associate’s credit report as well, as their circumstances could affect your ability to make repayments.


Myth 6 |  If you’ve never borrowed, you’ll get the best deals

It’s easy to see why some people think if they have never taken out credit on a credit card or loan that they would be seen as attractive to lenders.  However, the reverse is the case. You need to take out credit and repay it promptly to demonstrate that you have a history of making repayments on time and in full. This credit history demonstrates to potential lenders that you have a history of making repayments on credit – without it they have no information to go on.


Myth 7 | Repaying your credit cards in full lowers your credit score

On the contrary making repayments in full every month is likely to result in a better credit score, because it shows you can afford your borrowings. 


Myth 8 | Credit reference agencies give good and bad scores

Credit reference agencies collect and collate financial information about your debts and use that information to assign you a credit score. 

The score is a measure of your risk, the higher the score the lower your risk.  But they do not assign good or bad markers to your score. It’s up to lenders to make the decision.


Myth 9 | Getting a credit card will only make my credit rating look worse as it’s more debt.

If you use your credit card responsibly, paying it off each month and on time you can improve your credit rating.

However, if you are considering getting a credit card then using an eligibility checker tool before you apply, can limit any potential damage to your credit rating.  As making lots of credit card applications in a short space of time can make you seem like a high risk.


Myth 10 | My credit rating is horrible, but the damage is done and there’s nothing I can do about it.

If your credit score doesn’t look that great, there are  things you can do to repair it over time.

For example, check your credit report with each of the Credit Reference Agencies to make sure the information they hold on you is accurate. Any mistakes could be hurting your credit rating.  If you find any mistakes contact the relevant agency to get the mistake corrected.  

Demonstrate responsible borrowing by making payments on time and in full.

If you are struggling and think you might miss a payment get in touch with your lender straight away.

If you intend to apply for more credit, check to see if you are likely to be accepted first before applying.  Lots of applications, and rejected applications will hurt your credit rating.  

Read more: How to improve your credit rating


Myth 11 | Better salary and more savings equals a better credit score

Your income and savings have no direct impact on your credit score. Your credit  report includes a lot of information about your use of credit and your management of debt. But, it doesn’t include your income or savings. However your income will certainly improve your chances of getting approved by a lender for credit as they will ask for details  in their credit application.


Myth 12 | I could be on a credit black list

There is no such thing as a credit black list. Lenders use information from your credit report and your application to make a decision.  If you are getting frequently turned down for credit by different lenders it is likely because your credit history indicates you are a high risk.


Myth 13 | It doesn’t matter how many credit accounts you have

Financial lenders are concerned that you can afford to repay the credit they let you have.  So they prefer it if you don’t already owe large amounts on multiple accounts. They can even take into account the amount you could borrow against your credit limits, so it’s sometimes best to close down unused accounts and limit the number of new applications you make. 


Myth 14 | Paying debt erases them from credit report

Paying off your debt does not remove it from your credit report.  In general your credit report collates information about your credit dealings for a minimum of 6 years.  It is this history that gives lenders information to help them make a decision on whether to lend to you or not.  

So it’s important not to miss a payment, and make payments on time as you’d be wrong to think that these missed or late payments will disappear from your report once the debt is cleared.


Myth 15 | Some ‘companies’ can fix your credit

So called ‘credit repair’ companies cannot ‘fix’ your credit report.  They can review the information is accurate – but so can you. A reputable company can help you come up with a plan to repay your debts.  But the only legitimate way to enhance your credit score is to practice good credit management. 


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