Most people’s credit scores remain something of a mystery to them, and it’s easy to get caught up in the whirl of misinformation. So if you’re unclear on where that all-important credit judgment comes from, let Craig Tebbutt, chief strategy and innovation officer at the consumer credit reporting agency Equifax, bust some myths and set the record straight.
A credit score and credit reports are different words for the same thing
Myth
You often hear the two used interchangeably, but they’re different things. Your credit score is a numerical figure, calculated using the information in your much more detailed credit report. It’s the report that lenders use to see if you can afford a new credit card, loan or mortgage.
Also remember that there’s no such thing as a universal credit score. Different credit reference agencies may have different scoring systems – so the figures may vary.
Tebbutt says: “The score is a helpful measure, but we’d always encourage people to look at the full detail in their credit report rather than solely relying on the score.”
My partner’s credit score impacts my own
Myth
The good news is that both you and your significant other have your own individual credit score. So, if one partner has ostrich tendencies when it comes to debt, it won’t affect the other’s credit report or score.
But that’s not the full picture. If you apply together for a mortgage or car finance, for example, creditors will check both your credit reports.
Tebbutt explains: “When you apply for a financial agreement together, your significant other becomes your financial associate, so that may impact your ability to get credit if their score – or yours – is low.”
Being on the electoral roll impacts my credit score
True
Even if you don’t care about politics, being on the electoral roll will give you a leg up when it comes to your credit score.
“It’s vital because it allows lenders to easily confirm that you are who you say you are, and that the details you have provided are accurate,” says Tebbutt. “Registering your address on the voters’ roll each time you move gives them that reassurance and keeps your credit report as accurate as possible.”
Tebbutt encourages anyone to register to vote as soon as they can to start building a strong credit score.
If I keep checking my credit file, it will affect my score
Myth
This one’s as mythical as sky-blue unicorns. Tebbutt says: “We’d encourage people to check theirs regularly – monthly ideally. Doing so doesn’t impact your score.”
A study by the Financial Conduct Authority (pdf) in 2022 found that a third of people do check at least once a month.
People are most likely to look at their report when a big life change is on the horizon, says Tebbutt, but checking it more often could help you spot mistakes or alert you to a problem.
“You may see a credit agreement that you know nothing about or a company you have never had dealings with, which could be indicative of a scam or someone taking out credit in your name.”
Getting a credit card has a negative impact on my credit score
Myth
Credit cards sometimes get a bad press for encouraging people to spend more than they can afford, but from a credit score point of view they can be an asset when used carefully.
Tebbutt says: “A lender wants to understand how you’ve behaved with credit and if you can afford it, that’s why some use of credit – as long as you are paying it back on time – can help your score.”
Of course, missed payments will also be noted on your credit report and could reduce your score. Lenders may also sense a red flag if you’ve applied for lots of credit in a short space of time.
Tebbutt advises keeping your credit utilisation rate (how much of the credit available to you that you’re actually using) below 25%, but ideally paying off any balance in full each month.
My income doesn’t affect my credit score
True
How much you earn has no direct impact on your credit score. It’s not even listed on your credit report. Instead, credit scores are based on your credit history – how you manage and repay debt.
Income does have a part to play, though, when it comes to lenders working out whether you can afford to make repayments. They are likely to ask for that information at the same time as looking at your credit report to see how well you’ve handled debt in the past.
My housemates or people who’ve previously lived at my address can affect my score
Myth
A financially inept flatmate does not need to be your problem, at least when it comes to your credit score.
“Previous occupants of your home, or people who are currently sharing your address, will not affect your credit score unless you’re financially associated with them,” says Tebbutt.
So, unless you’ve applied for something like a joint credit account or mortgage together, you don’t need to worry about their financial woes.
How good – or bad – you are at paying rent could affect your score though.
I’m stuck with my credit score
Myth
People worry they’ll be stuck down a poor credit score cul-de-sac, but there are ways to get back on track. “Making payments on time, registering on the electoral roll and reducing the amount of debt you owe can all quickly have a positive impact,” says Tebbutt.
Unfortunately, if you default on payments and this is recorded on your credit report, the default notice is not so easy to change. It will stay there for six years. However, its effects can be offset by taking the positive steps above.
Want to know more about how your credit rating stacks up? Find out by heading to the Equifax website
