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The Common Myths Surrounding Your Credit Rating

With credit reports being integral for personal finance and mortgages, we debunk some of the common myths surrounding your credit history.

Finance27
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The Common Myths Surrounding Your Credit Rating

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  1. The Common Myths Surrounding Your Credit Rating Myth versus Reality

  2. Paying debts instantly improves your score REALITY... This is not necessarily accurate, as a credit score is essentially your entire payment history. Becoming solvent or clearing debts will not necessarily instantly improve it.

  3. Having too many credit cards is bad for my credit score REALITY... It’s not how many credit cards you have which is the problem, it is how you use them. Having five credit cards is not a problem, as long as you are on top of your minimum monthly payments.

  4. Bad credit never goes away REALITY.... Bad credit will not stay on your credit history forever. Typically, bankruptcies, foreclosures or debt collections will remain on your credit report longer, but this does not mean that your score will not improve in the long term. That said, it will usually take a good seven years for bad debts to disappear completely.

  5. Too many enquiries hurt my score REALITY.... This is a fairly common myth. In the modern, consumer era, most credit agencies will recognise that large payments, e.gmortgages or insurance policies, are a fact of life. Again, as long as you stay on top of your payments, then the number of enquiries made against you by a credit agency should not make a difference.

  6. If I pay my bills, I don’t need to check my rating REALITY.... Don’t rule out the fact that you some of the information on your account could be erroneous, or that some reports and credit histories may have information missing. If you need to take out a loan or a mortgage, then making sure that your rating is healthy is always worthwhile.

  7. The higher my income, the better my credit REALITY... It is important to remember that your income has absolutely nothing to do with your credit score, since your earnings and your ability to repay debt are, ultimately, mutually exclusive.

  8. Cash-only living will help your credit score REALITY... It will be hard to get a decent credit score if you don’t have at least some lines of credit in the first place. Lenders need to be able to see that you will be able to handle debt payments responsibly.

  9. This was a presentation by http://www.finance27.co.za/

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