Uncovering the Truth Behind Myths Surrounding Your Credit Reports Comments7 Comments

The following is a guest post about credit reports. If interested in submitting a guest post, please read my guest posting policy and then contact me.

Now and again, we might need to get our hands on some form of credit. From the smallest short-term credit card to a long-term mortgage, applying for credit is something many of us will do at some stage in our lives – but one thing that might stand in the way of a successful loan, credit card or mortgage application is whether lenders believe that we’re credit-worthy.

Credit ratings are calculated by one of three credit agencies who work with the vast majority of lenders, taking into account a number of factors relating to your financial history which determine the rating and therefore your likelihood to be approved by a bank or building society. Not everyone is sure about what a credit report entails, but they can have a big impact on your financial future.

Easier than you think

Some believe that getting hold of a credit report is difficult and that finding out can harm your chances of ever being approved for a loan. Here are some well-known myths about credit reports which are just that – myths:

There’s no such thing as a credit blacklist. Credit reports only stretch back six years.

Some think that their rating will stay the same forever. This isn’t true at all – it’s possible to change it by being more responsible with debts you have – clearing them and paying your bills on time can boost your score.

All kinds of financial data are listed on your report including records of paying phone and utility bills, not just financial products like loans and credit cards.

Not having taken out a loan doesn’t necessarily mean that your report will receive the highest rating. Interestingly, the highest scores are given out to people who have an impeccable history of paying back their loans on time and in full.

Although people think credit reports are expensive, they can cost as little as $5 from one of the three major credit agencies like Equifax or Call Credit.

Paying all debts off doesn’t always mean that your report will be favourable. Having a number of dormant credit cards could prove that you’re susceptible to getting into significant amounts of debt. Cancelling cards you don’t use any more can help.

In rare situations Credit reports do contain mistakes. If you’re convinced that there are some, feel free to raise it with the credit agency and they will help you.

If you’re disappointed with your credit rating, there are ways to improve it, as a spokesperson from Yorkshire Building Society suggests. They said:

“Set up a regular savings account and shop around to make sure you get the best rate. Ensure that you are on the electoral roll as this can improve your credit score. Review your day-to-day spending to see if you can make any cuts to increase you’re saving, then set up a budget for essentials and stick to it.”

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This entry was posted in Credit, Financial Advice, and tagged Comments7 Comments
By : Adam | 25 Jul 2013
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7 thoughts on “Uncovering the Truth Behind Myths Surrounding Your Credit Reports

  1. Jake

    Credit scores can be kind of difficult to understand, but they also can be really easy. If you pay all of your payment in full and on time then you’ll be helping your credit score. I don’t really worry about my score too much because I know there really isn’t much I can do about it as long as I pay everything back as promised. Credit history is the biggest downfall on my report and that’s just because I’m still pretty young. Only time will fix that.

    Reply
    1. Simon

      I can relate to that, with time and some more financial prudent credit card usage, your score is likely to improve. It boils down to paying your dues in time, being organized about your finances and generally being disciplined with finances.

      Reply
    1. Simon

      I would say that’s a fair amount and makes the reports accessible to more people. In the US I think you get one free one annually, then by law, credit card report companies are restricted to charge no more than $11.50 for it

      Reply
    1. Simon

      Totally agree Monica! Its crucial to go through the report with a tooth-comb and challenge or ask for rectifications for any mistakes. On a general note, its always a good habit to go through any financial documents with a keen eye.

      Reply

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