Credit Score Myths

Credit Score Myths | LoanTube

Thinking of applying for a credit card but worried about your eligibility? With so much information out there on credit scores, it can be next to impossible to sort the facts from the fiction and make an informed decision on your likelihood to be accepted.

Therefore, in this article, we’re going to be busting a few common credit score myths and offering some practical tips on how to improve a poor credit score to increase your chances of getting accepted for any type of borrowing.

Let’s get started by debunking a few common myths first:

Living with someone with bad credit affects my score

Wrong! Credit scores affect the individual only, so even if you’re living with people with poor credit it has absolutely no impact on you.

Paying in cash boosts my score

Again, this is a myth. Paying in cash leaves you with no traceable credit history, which in some cases makes it just as hard to get credit as if you had poor credit.

Having several credit cards is great for my credit score

Having several credit accounts all running at the same time is fine, as long as you service the debt on a regular basis and don’t miss any repayments. However, with so many cards, the temptation to go overboard with your spending can prove too much for some people, and they end up damaging their score by failing to make regular repayments.

Every time someone checks my score, it decreases

This is slightly more complex. If a lender does something called a ‘hard enquiry’ into your financial history, you can see a short-term reduction in your credit score. However, a ‘soft enquiry’ only shows part of your history and has no impact.

Now that we’ve cleared that up, here are a few tips to help you increase your credit score so you can improve your chances of borrowing and hopefully secure a better rate.

Service your debt – Make sure that you make regular payments to any outstanding borrowing and never miss a payment as this proves to lenders that you are able to keep up with repayments.

Get a small amount of credit – If you’ve never had any type of credit before, you’ll need to start building up a credit history. Mobile phone contracts and small credit card balances are a great way to get started, but again make sure that you make the repayments on or before the due date each month.

Only do ‘hard’ credit searches when necessary – Don’t allow lenders to carry out ‘hard enquiry’ credit searches unless you’re 100% sure that you want to borrow money and have carried out a soft enquiry yourself beforehand. There are plenty of free ‘soft search’ credit tools online that can give you an idea on eligibility, so make sure you do this first to discover your likelihood of acceptance.

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