This post was first published on the Credit Savvy blog.
I’ve come across a few interesting theories about credit, and many that are simply not true. So here’s the top 6 credit myths I hear regularly and the facts to set the record straight.
1. Checking your credit score will decrease it.
No, not true. When you check your own credit score through a credit reporting body, you are accessing it through what is called a ‘soft enquiry’ and this has no impact on your score. It’s a good idea to see where you stand and track it over time, so you can see if anything has influenced it. Plus, you’ll get a heads up if someone has used your identity.
2. You only have one credit score.
This is a big fat myth. In reality, you can have many credit scores. Each credit reporting body that has a credit file about you can provide you with a credit score. Even your credit provider can calculate your score based on the information they have about you. Your score is determined by the information in your file and the scoring model used, so don’t be alarmed if all your credit scores are slightly different, this is normal.
3. Credit repair companies can remove any default from my credit file.
This isn’t always true. Defaults can only be removed from your credit file if the listing is incorrect or out of date (more than five years old). Individuals can do this themselves and without cost by contacting the relevant credit provider. Even if you pay a default, the listing will still remain on file, but it will just be updated as paid.
4. I don’t need to check my credit score because I always pay my bills on time and haven’t applied for credit in a while.
It is still wise to check your credit score and credit file information. This can help to prevent you from becoming the victim of identity theft and ensure that your file is accurate and up to date. You can do this via a credit score monitoring service like Credit Savvy. It’s quick, easy and free. Bonus!
5. I don’t have to worry about paying my phone or utility bills on time because they are not recorded as part of my repayment history.
Be careful here. Whilst late payments for telco and utility bills are not recorded as part of your repayment history, they may be recorded as a default on your credit file if they are $150 or more and over 60 days overdue and this can seriously hurt your credit score.
6. The more credit I have applied for the better my credit score.
STOP! Right now. This is simply not true. Too many applications in a short time frame with different lenders could indicate you are over extending yourself financially or that you are in financial distress and can negatively impact your score. Remember, only apply for credit if and when you really need it.
Have you heard of any other theories about credit? Share them with us in the comments below and we’ll fact check it for you!