Busting the Credit Myths

Sam Jackson

November 16, 2012

November 13, 2018

Busting the Credit Myths

There are many misconceptions about what affects how lenders rate customers for credit - and this means people could be doing their finances long-term damage.

Myth 1

25% of Brits believe that missed credit card and mortgage payments DO NOT affect credit scores

Myth 2

Almost 80% of Brits believe that being turned down for credit by one lender WILL have a negative impact

Myth 3

One third believe that having an online gambling account will negatively affect how lenders view them

Myths uncovered

Research conducted by Opinion Matters on behalf of Experian CreditExpert among a representative sample of 1,444 UK adults in November 2012 discovered some of the most common myths and misconceptions that exist about credit scores, credit reports and applying for credit.

Among the most startling credit myths uncovered are:

  • One in four Britons believe that missing mortgage payments (26 per cent) or credit card repayments (24 per cent) will not impact their credit score.

In actuality, missed payments can have a significant negative effect on your credit score and credit rating as they show poor credit management skills, a key criteria lenders look for when deciding to extend credit or not.

  • 78% of those surveyed believed that being turned down by one lender will have a negative impact.

In fact a lender's decision in whether or not to extend credit is not registered on an individual's credit report. However, the footprint of a potential lender's search is recorded for 12 months. if you are repeatedly and rapidly applying for credit, too many footprints with harm your score as it appears that you are in financial distress. If you have been turned down by one lender, ALWAYS ask the lender why and check your credit report to improve your credit rating before applying again.

  • A further third also think that having an online gambling account will negatively affect how lenders view them.

In truth, the names of lenders are not recorded on your credit report that lenders see - only how well you manage the credit that a lender has extended to you.

  • 50% of respondents are not aware that joining the electoral register is one of the quickest ways to help improve your rating.

In addition, of those surveyed who have been turned down for credit in the past, a staggering 73% did not find out why!

One in 10 haven't checked their report and score with a credit referencing service like Experian CreditExpert, because they assumed it would be bad, while five per cent haven't applied for credit because they assumed they would be turned down.

Busting Credit Myths: Top Tips to improve your credit rating

  1. Make sure you are registered on the Electoral Roll at your current address. If you are not registered to vote it might cause delays when you apply for credit and it can even cause some creditors to turn down your application as they cannot corroborate where you live.
  2. Make sure you make all regular payments on time, such as credit cards and mobile phone bills. Many organisations register information about their customers with the credit reference agencies. Missed or late payments are likely to be registered on your credit report and may harm your chances of getting credit in the future.
  3. Make sure that all of the information on your credit report is accurate and up to date. Dispute anything you don't agree with. It's free to see your Experian credit report and Experian credit score with a 30-day trial of CreditExpert.
  4. If you have had previous credit problems and there were special circumstances at play e.g. losing your job / family bereavement etc, explain this on your report by adding a notice of correction to any late payments from this period etc.
  5. If you had financial links to other people which are no longer relevant, ask for them to be removed from your credit report (e.g. if you are divorced or separated but your former partner is still shown.)
  6. Close any accounts you no longer use. A large amount of unused credit may negatively affect your credit rating. This is credit that you have already been granted and can make use of without further checks. Keeping accounts open you don't use can also make you more vulnerable to fraud.
  7. Using free budgeting software like Money Dashboard you can keep your finances in check. You'll never accidentally miss a credit card payment, or incur a bank charge, if you are aware of your balance and budget at all times.

* New members only. Monthly fee applies after free trial. Free trial period starts on registration – further ID verification may be required to access full service, which may take up to five days.

Sam Jackson

Money Dashboard

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