Six credit rating myths unmasked!

Six credit rating myths unmasked!. Confused about what does and does not affect your credit rating? You're not the only one! Victoria Bischoff exposes the truth about six common credit rating myths…

Since the credit crunch, more and more of us are throwing around terms like 'credit rating', 'credit score' and 'credit report' - but what do they actually mean?

With so many myths, rumours and superstitions surrounding these words, it can be difficult to distinguish fact from fiction.

In this article I'll get to the bottom of six credit rating myths and set the record straight once and for all.

Six credit rating myths unmasked!

1. FICTION: I have been 'blacklisted'.

FACT: Despite popular opinion, there is no such thing as a credit 'blacklist'.

If you have a bad credit score, you will not have a permanent black mark put next to your name, nor will you be listed in a little black book of bad borrowers.

2. FICTION: If I am rejected by one lender, everyone will turn me down.

FACT: There is no universal credit rating for any individual.

Your credit rating is constantly changing depending on who you apply to, what you apply for and your circumstances at the time of application.

Remember, each lender uses a unique formula to calculate your credit score, so it is not uncommon to be rejected by one lender only to be accepted by another.

3. FICTION: Previous occupants of my house can affect my credit score.

FACT: Only people, not houses, have credit histories,

If a lender conducts a credit check, they will only have access to your details and will not be able to see the financial status of previous occupants.

This means if the person who lived in your house before you had a somewhat chequered past, it will not impact your own ability to get credit.

4. FICTION: If I have never borrowed before, credit will be easy to come by.

FACT: Lenders like to see evidence of how you have handled credit in the past.

If you have never needed to borrow money before, you may struggle to prove you are a responsible borrower and lenders may turn you down for credit as a result.

If you're in this situation, you need to build up a credit history that demonstrates your ability to manage money sensibly.

A credit building card could help you plant your foot on the first rung of the credit ladder.

Although these cards do not offer the most attractive deals on the market, if you clear your entire balance every month, you will avoid paying high rates of interest and start to build up a credit history.

You can find out more about this type of card in my article 'This card could help rebuild your credit rating'.

5. FICTION: Only successful applications will be recorded in my file.

FACT: Each time you apply for credit, you leave behind a telltale footprint on your credit file - regardless of whether your application was successful or not.

If you leave behind too many in a short space of time, lenders may think you are financially overstretched or suspect fraudulent activity is going on.

Therefore, always space out your applications and avoid applying formally for products if you are unlikely to be accepted.

6. FICTION: Checking my own credit report leaves a footprint.

FACT: Keeping track of your own credit report will not damage your score.

In fact, in these troubled times checking your own report is a sensible move.

You can request a copy of your credit file from one of three referencing agencies in the UK: Experian, Equifax and Callcredit.

Once you have your file, make sure the information is accurate, the debts are listed correctly and amend any mistakes immediately.

If the agency refuses to make any changes, you are entitled to add a 200 word 'note of correction' which will be seen each time your file is assessed.

Right now, you can check your credit report for free by signing up for a 30 day trial with Credit Expert. Provided you cancel your subscription within the 30 days, you won't pay a penny for the service.

To find out more about how to clean up your credit history, you can read my articles 'Six ways to improve your credit score' and 'How to improve your credit rating'. ( mailcompare.mailonline.co.uk )