Why? Because, while many of us might be aware we have a score, a lot fewer of us really understand how it works.
So, to help put your mind at ease, here are six of the most common credit score myths – busted!
1. Your address could be ‘blacklisted’
It doesn’t matter if the previous occupant was a prince or a pauper, your credit score is a personal record and so you will not find any evidence of them on your credit report – unless, that is, you share a financial connection with them, which leads nicely on to…
2. If your partner – or spouse, even – has a bad score, your score will also suffer
A credit score is specific to you and only features information on your lending history.
The only way someone else’s credit history can affect you is if you have a financial connection with them – a joint mortgage or credit card, for instance. Then lenders may look at their credit report in addition to yours as their financial situation could affect your ability to repay.
Living with someone, or even being married to them, does not – by itself – create a financial connection.
3. The less you borrow, the better your score
The whole point of a credit score is that it allows lenders to judge from your previous borrowing and repayment habits whether or not you’re too much of a risk to lend to. So if you’ve never borrowed, or only borrowed very little, this gives them less to go on and makes their decision harder – which has an adverse effect on your credit score.
You need to strike a balance though – each of us has a limit on the amount we can borrow and so maxing yourself out with loans, credit cards and overdrafts will have an adverse effect on your score.
4. You can’t get a credit card with a bad score
Although lenders keep the best deals for those with the best credit scores, just because you have a bad credit score it doesn’t mean you can’t get a credit card.
What it does mean, though, is you’ll be offered credit at a higher rate of interest which, if you start racking up interest on your borrowing, can lead to greater debt problems and an even poorer credit score.
That said, taking out a bad credit credit card can be a great way to improve your credit score, as Melanie Wright explains in her article, Boost your credit score with Capital One’s Classic Platinum card.
5. Credit reference agencies all use the same scoring system
One of the biggest causes of credit score confusion is the fact there is more than one credit referencing agency – and they can all hold different scores for you.
Not all lenders use the same agency when running their checks, so rejection by one may not necessarily mean rejection by another.
The three main agencies and there scoring systems are as follows:
Maximum score: 999
- 0-560 = very poor
- 561-720 = poor
- 721-880 = fair
- 881-960 = good
- 961-999 = excellent
Maximum score: 600
- 0-278 = very poor
- 279-366 = poor
- 367-419 = fair
- 420-466 = good
- 467 and 600 = very good
CallCredit - Credit Compass score (paid-for subscription)
Maximum score: 800
- Up to 500 = poor
- 501-550 = fair
- 551-600 = good
- 601-650 = very good
- 651-800 = excellent
6. You need to sign up with an agency to get your credit score
By law, credit reference agencies must offer you a statutory credit report that can be posted to you for just £2 – so to get your score from each major agency you need pay no more than £6.
You can sign up for a package though if you want unlimited online access to your score and email alerts if anything changes – Experian’s CreditExpert service charges £14.99 a month, for example after an initial 30-day free trial.
But, unless you are planning on applying for any major credit soon – such as a mortgage – this could prove an unnecessary ongoing expense.
To compare credit referencing agencies' offerings and what they cost, check out our very own credit reporting channel.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.