With your credit history being crucial to your ability to take on finance, loans or mortgages, we debunk some of the common myths surrounding credit ratings and credit scores, compiled from some of the leading money advice websites.

1. The Common Myths
Surrounding Your Credit Rating
MYTH VERSUS REALITY

2. Paying debts instantly improves your score
 REALITY...
 This is not necessarily accurate, as a credit score is
essentially your entire payment history. Becoming
solvent or clearing debts will not necessarily
instantly improve it.

3. Having too many credit cards is bad for my
credit score
 REALITY...
 It’s not how many credit cards you have which is the
problem, it is how you use them. Having five credit
cards is not a problem, as long as you are on top of
your minimum monthly payments.

4. Bad credit never goes away
 REALITY....
 Bad credit will not stay on your credit history
forever. Typically, bankruptcies, foreclosures or debt
collections will remain on your credit report longer,
but this does not mean that your score will not
improve in the long term. That said, it will usually
take a good seven years for bad debts to disappear
completely.

5. Too many enquiries hurt my score
 REALITY....
 This is a fairly common myth. In the modern,
consumer era, most credit agencies will recognise
that large payments, e.g mortgages or insurance
policies, are a fact of life. Again, as long as you stay
on top of your payments, then the number of
enquiries made against you by a credit agency should
not make a difference.

6. If I pay my bills, I don’t need to check my rating
 REALITY....
 Don’t rule out the fact that you some of the
information on your account could be erroneous, or
that some reports and credit histories may have
information missing. If you need to take out a loan or
a mortgage, then making sure that your rating is
healthy is always worthwhile.

7. The higher my income, the better my credit
 REALITY...
 It is important to remember that your income has
absolutely nothing to do with your credit score, since
your earnings and your ability to repay debt are,
ultimately, mutually exclusive.

8. Cash-only living will help your credit score
 REALITY...
 It will be hard to get a decent credit score if you don’t
have at least some lines of credit in the first place.
Lenders need to be able to see that you will be able to
handle debt payments responsibly.

9. This was a presentation by
 http://www.finance27.co.za/