Keeping a good credit rating influences your ability to obtain mortgages, credit cards, mobile phone contracts as well as car insurance. Knowing the myths and truths about credit scores is vital. So, let us go ahead and bustsome myths.
Universal credit rating
In the UK, there is no such thing as a universal credit score. If you are rejected by one bank, it does not mean that the rest of the banks will reject you too. Just make sure that you check your credit score after you have been rejected.
Credit scoring is simple. Would you lend someone money if they had a history of non-repayment in the past? Of course not. Though there are some institutions that lend money to people with a bad credit score,beware as the interest rate is very high.
You can quickly fill out the application form
Yes, this may be true, but it would be better if you take more time to complete it. An application form is where the lenders get to know more about you. Make sure that your application form shows the same information as you had before – family size, postcode, etc. Being consistent with the information you put eliminates the risk of being flagged for fraud.
Your credit score dictates your interest rate
Your credit score is not only used in determining if you should get a loan or not, it is alsoused to identify how much the interest rate should be. For example, a bank advertises a 6% interest rate for a personal loan. If you have a bad credit score, your interest rate might climb up to 40% for one year. This is also true for credit cards.
Credit and fraud scoring go hand in hand
When applying for a loan, they don’t simply assess if you are capable of paying the loan in the future but rather they also determine if the information you provide is correct and legitimate.
You can buy your credit score from credit reference companies
Credit reference companies sell you various data and monitoring products that may help you improve your credit score. Unfortunately, this is not always true. Different companies score you differently and they have more information about you compared to your credit file.
It affects your capability to purchase
If you have a poor credit score, you may be rejected for a mortgage as well as credit cards. However, this depends on what type of mortgage you are applying for. For example, when applying for a VA loan, a veterans home loan credit score may not need to be as high compared to what they would need for a traditional mortgage loan. Your credit score is also related to your ability to pay your utilities on time. It also affects your application for quick loans so it will be best to pay your bills on time.
Keeping a good credit score is necessary nowadays. It makes your life a bit easier and thus you may want to find ways to improve your credit score. Things as simple as checking your credit file and closing unused credit cards can actually help you achieve a better credit score.
Don’t be afraid to be rejected.This will help you understand your credit score better in the future.