Don't be daft! What really affects your credit score

By Natasha Culzac
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What are the biggest myths when it comes to credit scores? Does my address affect it? What about my gender? Answers here

Did you know that becoming vegan makes your credit score goes down? Or that if you say Beelzebub three times while jabbing yourself in the eye with a pencil it goes up? Okay, jokes aside there really is a lot of misinformation floating about when it comes to credit scores. You hear one thing from one person, read another thing online, and you don’t really know how to make sense of it all.

Obviously a lot of things affect your score, but there’s a hell of a lot that doesn’t. We’ve put together a comprehensive guide of fact vs fiction when it comes to credit scores. Read that guide by clicking here. The below is a shorter summary highlighting the most common myths.

My address affects my credit score

Your credit score is based on your personal situation alone, not your postcode. Dodgy areas, which might affect a car insurance premium for instance, has no bearing on your score. Nor does the financial behaviour of some random person who lived in your property before you. You are only financially associated with someone if you share a joint account or credit product, such as a loan or mortgage – regardless of where you or they live. Did you also know that your monthly rent payments can finally contribute to your credit rating - if you want to find out more on this, click here.

Checking my credit report makes my score go down

Surveying your credit report using one of the reference agencies like Experian or Equifax does not affect your credit score. That is because these firms use what is called a Quotation Search or soft credit check – these checks are only seen by you and not at all by lenders. Full Application Searches or hard credit checks, which do stay on your account for a year and can be seen by lenders, only occur when you actually formally apply for credit. These hard checks do affect your score and the more credit applications you make in a short space of time, the worse it is for your score. One great thing is that more and more lenders, price comparison sites and credit reference agencies are using softer quotation searches to give you tailored deals and to pre-approve you for credit. This means you see the products that you’ll most likely be accepted for and can essentially shop around without hurting your credit score.

If you've checked your credit score and are mind boggled about what it actually means here's a article that explains the low down.

A missed bill payment no longer affects my score if I pay it off

Unfortunately missed payments stay on your account for six years and they do affect your score - it doesn’t matter whether you paid it off within weeks or hours. The best thing to do is set up a direct debit so that your bills are never overdue due to forgetfulness. Want to know alternative ways can help your credit score? A credit card can be a boon for your financial attractiveness, but remember that every rose has it's thorns, there also pitfalls that you may not expect. To find out more, read this handy article.

 

My religion, sex, marital status, race and sexual orientation affects my score

Thanks to the guys who drafted the Equal Credit Opportunity Act, lenders cannot take any of the above into consideration when scoring you. Your education level also has no bearing on your creditworthiness. If you're curious about how lenders decide to give you credit, read this article. Lenders know a good deal about your financial affairs, so it's best to get yourself clued up on what they do and don't know, if you want to know more click here.

It’s the credit referencing agencies who decide whether you get credit

It’s actually 100% down to the lender whether you get approved for what you want. Credit reference agencies, such as Experian, just collect information on you and neatly present this as a package so that lenders can see what your debt situation is. Your report is also only one aspect of the decision-making process – lenders will also look at the information you put in your credit application form, as well as any privately-held information they have for you. The scores you get from Experian, or Equifax, or Callcredit, are just guides and are not definitive numbers.

Top Takeaway

Getting clued up on what does and does not affect your score means you’ll be better able to monitor and improve it. Keeping an eye on your credit report and checking it at least once a year is part of good credit management.

 

 

By Natasha Culzac

Thanks to a journalistic career history and a childhood at Sylvia Young Theatre School, Natasha has her fingers in a few professional pies, doing her best impression of a model and actor as well as personal finance writer. Outside of work she compulsively watches BBC period dramas and constantly lies to herself that this year will be the year she learns French, once and for all.

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