The Inside Edge
When it comes to credit, obtaining credit, bad credit and so on there are many misconceptions and myths. We set out to bust some of these myths and give you some useful information that could help you to obtain and manage credit.
Previous occupants may affect my credit rating
These days it doesn’t make any difference whether the previous owners or tenants of your current property were made bankrupt or whether they were multi-millionaires. Lenders just want to know about your repayment history, how much you owe and whether you can afford to pay them back on time. If you have only lived at your current address for a short period of time however, they will want to know about your previous address for their records. As long as you never shared a financial connection with the previous occupants you are not linked in any way.
You can only have one credit score
It’s amazing how lending criteria differs between lenders. One lender might be willing to give you a mortgage or loan whilst another might turn you down flat. Each individual lender, on the high street, or otherwise uses different credit scores and ratings to determine whether they are willing to lend to you or not. Lenders may also use different scores for different products. For example, the lending criteria they use for mortgages and personal loans may differ hugely and just because you were accepted for a loan doesn’t mean you’ll be accepted for a mortgage. Your credit history also changes over time. If you missed a credit card repayment last month then your score could significantly decrease.
Past debts don’t count within my credit rating
In most cases past debts will stay with you for a long time especially if you have had problems meeting repayments. CCJs, defaults, IVAs and bankruptcy stay on your credit record for a minimum of 6 years and even one missed payment can stay on your record for at least 36 months. That’s why it’s so important to keep up repayments with all of your creditors as problems repaying can affect your ability to obtain more credit in the future.
Lenders prefer you to have lots of credit and past debts
The main thing that lenders are interested in is whether you are able to meet the repayments on what they lend you. If you have lots of credit cards, store cards, a mortgage and a loan the lender will add up the amount of credit you have available to you and assess whether you can afford any further credit. If you have a credit card with a £1000 limit that you have never used, the lender will still count this as credit you are using and this will affect your score. All credit, whether used or not, will be used to assess your rating.
If you have no credit or past credit history, you can get the best deals
Actually the reverse is true. Lenders want to know how you handle credit and the best way they can see this is through past or current agreements. If you have no debt or credit history on your account lenders may be less willing to lend to you. A few well managed credit or store cards on your account can count in your favour.
Repaying your credit cards in full decreases your score
We’ve no idea where this one came from! Making payments on your credit card whether full payment or minimum payment will help to improve or maintain your score. However, making payments in full can help to improve your score more as you are proving that you can afford and manage the available credit very well.
If you are contemplating buying a property or taking out a loan for home improvements you should check out your credit rating first. Remember, each search on your credit file leaves a footprint and the more footprints you have can alert lenders. They may think you are being turned down all over the place and therefore be less inclined to accept you. Research the best deals, check out your credit report and take care when applying for credit.