The subject of credit scores can undoubtedly be an intimidating one for a lot of people. Given the profound impact that your own credit history – and associated scores – can have on your financial future and ability to obtain credit on the terms that you want, it might be the kind of thing you’re inclined to keep “out of sight, out of mind”.
But here at CashCompare, we’d urge you not to do that – especially given that credit scores really aren’t as scary as you might think. Having said that, there can also be certain ways in which people might be complacent about their credit situation, so we are duty-bound to warn about that, too.
So, to help clear up some of the mystery that surrounds credit scores and people’s personal credit situations, we’d decided to set out just three persistent myths on the topic.
“If I’ve never borrowed, I must have excellent credit”
It’s understandable to imagine that if you’ve never borrowed money and have never been in any kind of debt, you must automatically have good credit. However, it’s also untrue.
When a credit reference agency is formulating your credit score, it will take various factors into account, with your lending history being one of them. This is important to lenders, because it means if they receive a loan application from you, they will be able to check for themselves what your track record is of repaying debt.
But in the event of you not having any borrowing history at all, the lender will not be able to make that kind of informed judgement. It is therefore necessary for a person to have some history of borrowing money – and repaying it – if they are to start building a credit score.
“I must be on the credit blacklist”
Here’s something that might be a source of relief for you; there’s no such thing as a “credit blacklist”.
It is important to think about your credit situation as a case of different shades of grey, rather than black or white. Your credit score will be liable to go up and down over time, but lenders will make their own decisions on whether to lend to you, and on what terms, when you apply for a loan from them.
If you do have bad credit – perhaps as a result of having had too many loans in the past where you failed to make the required repayments when they were due – this doesn’t necessarily mean your loan application will be refused.
Loans for people with bad credit do exist, but they might come with certain conditions, and availability might vary. However, a poorer credit score could mean you aren’t able to borrow as much as you might have otherwise been able to, or you might have to pay a higher interest rate on your loan.
Borrowing money comes with responsibilities. Ensure you fully understand the terms and think carefully about whether you can afford the repayments before taking out a loan.
“My partner’s financial habits will be dragging down my credit score”
We need to be a bit more “qualified” with this one; you and your partner’s credit reports could be linked if you have previously applied for joint credit together (such as for a loan, mortgage, or bank account).
If this is the case for you, and the two of you no longer share any joint accounts, it is possible to request a notice of dissociation from credit reference agencies such as Equifax or Experian.
Please note that such a notice can only be issued if all joint accounts have been closed. Furthermore, you may be asked for proof of your financial connection having been broken, such as divorce papers and paperwork from any creditors confirming the two of you are no longer named on the accounts.
Otherwise, the mere fact of people being in a relationship does not automatically mean their finances and credit report will be linked together.
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Hopefully, the above will have left you feeling less mystified by some of the aspects of credit that can sometimes seem confusing or scary to a lot of people.
If you're unsure about the best financial solution for you, seek independent financial advice.
As a broker that works with lenders offering loans for people with bad credit, or even simply those who might be seeking a quick cash injection for their wedding, a holiday, or home improvements, CashCompare stands ready to assist people in a variety of financial situations.
By completing and submitting our no-obligation quote request form, you can discover in a few minutes what could be possible when you seek funds through one of our represented lenders. This doesn't guarantee approval and be aware that a hard credit search might be conducted if you decide to proceed with an application.
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"Warning: Late repayment can cause you serious money problems. Always consider if borrowing is the right option for you and ensure you can repay your loan." For help, go to moneyhelper.org.uk.