Sometimes a credit default or negative listing is the last thing someone expects to find hiding on their credit report. Assisting to remove these negative listings will not only improve your credit score but will also increase the likeliness of you getting approved for a finance application.
That is the positive. The negative is that not everything can be removed from a credit report. There are some listings that have to remain on a credit file and cannot be removed. Confused about what’s really true when it comes to credit scores and credit reports? We’ll debunk the following credit misconceptions so that you have a better understanding moving forward.
Common credit misconceptions
1. Having no debt means having a good credit score.
It may appear that having zero debt is an ideal situation for keeping your credit score intact, but just like having no job experience on a resume, it can also make the lender uncertain of how reliable you are with managing credit. Thankfully there exist other ways to strengthen your financial credentials without taking out any loans; being consistent and timely in payments for things such as mobile phone plans or utility bills will build up your credibility over time.
2. You only have one credit score.
It is important for every Aussie to recognize that they do not have just one credit score; rather, the average individual has three. This is because there are three main credit bureaus which all use their own methods and algorithms when calculating a person’s score. Additionally, specific lenders may prefer a certain bureau over another so it is paramount to be familiar with your scores across all of them in order to make informed decisions moving forward.
3. Checking your credit score drops your credit score.
Will my credit score be affected if I check it? No, not necessarily. It is important to differentiate between a hard and soft enquiry. A hard enquiry occurs when a lender requests your credit score in order to determine whether or not they will lend you money; this type of enquiry does impact your score negatively. On the other hand, a soft enquiry generally involves either yourself or an agent seeking out information on your credit score without the intent of applying for any form of loan/credit – this type has no negative effect whatsoever.
4. Marriage combines your credit score.
It’s a common misconception that getting married can merge two people’s separate credit ratings, but it actually hasn’t any effect on either party’s individual score. Nevertheless, all joint accounts will be reflected in the report of both spouses after they tie the knot.
5. Buy Now Pay Later services don’t effect your credit.
Buy now, pay later services offer shoppers the convenience of purchasing items and paying for them over time. Unfortunately, these providers do not always assess whether you are credit worthy when registering which means that it is your responsibility to keep track of your spending in order to avoid accumulating debt beyond what you can afford. If this happens, then it may ultimately result in a less favorable credit score.
6. A high income means a good credit score.
Contrary to popular belief, having a high income is not directly correlated with good credit scores. Rather than relying on your salary bracket to determine your financial responsibility, what matters more is the stability of your employment and steady flow of revenue.
7. You need to have debt to have good credit.
To build a strong credit score, you do not need to incur debt – simply demonstrate responsible financial habits. Even making regular payments for something minor such as your smartphone bill is enough to make an impact on your rating. Additionally, it’s important to keep up with payments and avoid too many enquiries in order to maintain good standing.
8. All debt is bad debt.
While it makes sense that the more debt you have, the lower your credit score will be, not all debt is created equal. If you’ve taken out a loan with reasonable terms such as those associated with a home mortgage or car loan and pay your bill on time each month, then this type of “good” debt won’t necessarily hurt your credit score. On the flip side, too much high-interest bad debt such as from payday loans or expensive store credit cards can significantly damage one’s overall financial health – including their credit score!
9. A low credit score is something you’re stuck with.
While having a low credit score may make you feel like getting approved for credit is impossible, it’s important to remember that your score can change! By being disciplined with payments and managing active accounts wisely, you can take steps towards improving your current number. When done correctly, this process of improvement takes time but will eventually pay off in the form of greater financial freedom.
What can you do if you have bad credit or a low credit score?
A bad credit history can make it difficult to get approved for a loan, but there are steps you can take to improve your chances. Knowing the common credit misconceptions can help you better understand your position when it comes to your credit score and credit report. Here at Clear Credit Solutions, we specialize in helping our clients fix bad credit, so they can obtain the financing they need. We’ll work with you to help remove negative listings from your credit file and help improve your score.
