Bad Credit Myths
Bad credit: a phrase we all hear, day in and day out. For some, they may view it as the bane of their life, as it can drastically affect any credit available to them. It might mean that loan repayments are exceptionally high, or they might even be refused completely.
This can leave many people in a bad situation, in which they desperately try to improve their credit rating by taking out more loans. They may have the intent of paying them off, but due to changes in their financial situation or the increase in interest rates, it could potentially leave them in a worse situation.
A lot of people don’t understand exactly how a bad credit rating might affect them, as there are a lot of harmful myths surrounding the topic.
Let’s have a look at 3 common myths surrounding bad credit, to help you improve or maintain your credit score, and reduce the likelihood of needing to take out a bad credit loan or payday loan.
It Takes 7 Years to Improve Your Credit Score
One of the most prevalent myths surrounding a bad credit score is that it can take up to 7 years for your rating to improve. Whilst there is some truth embedded deep within this rumour, for the most part is just isn’t true.
The rumour comes from the idea that it takes 7 years for something to be removed from your credit score, which is true for the most part. However, this does not mean that you can’t increase your credit score!
As long as you pay your bills on time, and really work on reducing your credit utilisation, your credit score WILL improve, even if there are prior defaults. Obviously, once these clear from your credit file, you will notice further improvements, but that shouldn’t deter you from making the effort to improve your credit today.
Checking Your Credit Report Can Reduce Your Rating
This myth comes from the principle that when a company checks your credit score, they might leave a record! This is true in some situations, such as when a direct lender will perform a ‘hard check’ on your credit file, but you will always be notified prior to this taking place.
If a company were to complete a ‘soft’ check, then no detrimental record will be left. Similarly, if you were to check your own credit score, there would be no negative impact.
You have a right to view your own information at any point – just make sure you go through a respected credit reference agency such as Experian.
Your Job Can Affect Your Credit File
When you think of your credit file, you probably think about money. When you think about money, you might think about your job, so it’s completely understandable that some people may associate a ‘better’ job with a ‘better’ credit score.
This is not the case at all – credit reference agencies can’t classify one job as ‘better’ than another, as it creates unrealistic expectations for those seeking credit.
Your credit file is affected primarily by:
– Credit utilisation
– Payment history
– Amount of debt
Those with higher paying jobs may have increased means to make larger payments to reduce their debt, though it also makes them more likely to have larger amounts of debt. Live within your means, so they say!