18 Oct 5 Credit Rating Myths
5 Credit Rating Myths
To start off I believe it’s important to explain as simply as possible how a credit rating or score is formed.
Credit rating goes up or down depending on how you handle your credit (or loan). If you pay your loan payments timeously your credit rating will improve, if you don’t your credit rating will go down. (This of course is highly simplified but the concept doesn’t change)
Although the concept of how to alter your credit rating is fairly simple, there are still a few myths floating around:
Myth #1: Using a debit card instead of a credit card will improve your credit score.
It seems over half a group of people asked believed a Debit instead of Credit Card would improve their credit score. This however is incorrect as a debit card does not show any ability to manage credit effectively and thus has no bearing on your credit rating.
Myth #2: Closing credit accounts in your name will positively impact your credit score.
The impact closing a Credit Card has on an individual’s credit rating in completely circumstantial. Sometimes it can have a marginal effect while other times it could negatively impact credit rating depending on the credit history before closing the account.
Myth #3: Children or other dependents affect an individual’s credit score.
Although it is noted in the information attained by your credit report, children have no impact on your credit rating by simply having them. Of course if require credit to pay for your children that is another story.
Myth #4: Bank account balances are reflected on credit reports.
Bank balances have no effect on credit rating. Even if you save most of your salary every month, this would not be considered in your credit score.
Myth #5: Income level is reflected in a credit score.
A credit score has no salary data. However lending agents will require this information to assess the ability to pay back a loan. How you pay back the loan will affect your credit rating.