There’s plenty of urban legends about credit scores, which can make finance seem even more confusing. But it doesn’t have to stay a mystery…
Somewhere in our psyche, most of us know that a better credit score means better things. But in practical terms, most of us don’t really know what our credit score actually impacts.
For example - can you improve it? What can affect it in the first place? Does praying to the moon on the third Wednesday of every month mean our credit score will jump up?
The long and short of it is that most of us aren’t really sure – even about that last one.
We’re here to separate the rumours from the actual facts. Here’s what you need to know about your credit score…
Not paying your bills on time could affect your credit score
If you’re consistently late paying your bills or miss payments, this might reflect negatively on your credit score as lenders could see you as unreliable.
If you miss a payment on your bills it could show up on your credit score for up to six years. CreditWise from Capital One can help you to see if any missed payments are flagged on your credit report.
Keeping up to date with things like your utility bills means you’ll avoid getting a negative mark on your file, so make sure you’re in the best position to pay them on time.
Registering to vote affects your credit score
This seemingly very strange way to potentially improve your credit score is true.
If you’re eligible to vote, make sure you’re registered and that all your details are correct on the electoral roll. Obviously, it’s free to register to vote.
It can be helpful for your score as correct, up-to-date details on the electoral roll will help lenders confirm your identity. If they struggle to do so, you may get turned down, which could lead to an unnecessary impact on your credit score.
You won’t have a credit score if you’ve never borrowed money
You’re likely to have a more detailed and comprehensive credit score if you have a credit card, a bank loan and regular repayments on things such as a mortgage or a car. You may still have one if you don’t have any of the above, but it might not be as high as you’d hoped.
If you’re new to credit, you’ll have what they call a ‘thin file’. That means there’s not as much information as there could be about how you use credit, so lenders have less information to back you up as a reliable borrower.
People you live with can affect your credit score
TRUE AND FALSE
The good news is your housemates won’t affect your credit score if you have your names on separate bills.
However, if you share a household account with a partner or friend and they’re bad at paying on time, they could affect your score if they’re not as consistent as you are.
It’s best to be careful who you share bills with and keep your address up to date on all of your accounts.
Your student loan affects your credit score
Hurray! Some good news. That pesky student loan that stays with you longer than anything else in your life (probably) isn’t ever counted in a credit score.
So you can rest easy that a little bit of it will just come out of your salary every month without it affecting your credit score. Phew.
To find out your credit score, see your full report and find out what’s affecting it for free, visit CreditWise from Capital One.