Uncovering the Truth Behind Myths Surrounding Your Credit Reports

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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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