Credit is one of the most vital aspects of finance, yet one of the most misunderstood. But understanding how credit works is crucial, especially when your credit score could be a determining factor in getting an apartment, getting access to certain amenities, and even a job. Understanding the mechanics of credit repair is also important if you don’t want to get swindled by so-called specialists that will bury you even deeper in the hole. Here are some of the most common credit myths, and the actual truth behind them.
Table of Contents
Credit Score is the End of Be All When Getting a Loan
Not having a good credit score or not having established credit does not mean that it’s impossible to get a loan. Many lenders nowadays will prefer looking at your income first before awarding you a loan. So, if you have a steady income, there are plenty of services that will accommodate you.
And we’re not talking about payday loans only. There are tons of providers that offer short term loans that can be repaid in anywhere between one to 12 months. While those will often not be as high as a personal loan contracted through a bank, they could be a good option to get you out of a tough situation or for an urgent expense if your credit history isn’t great.
Credit Repair is a Scam
While a lot of credit repair companies are scammy, credit repair itself is far from a scam. The thing is that many credit repair services do things you could easily do yourself.
The best thing you can do to repair your credit is, of course, to repay outstanding debt. But don’t assume that simply closing accounts will do. You want to repay accounts in full and make sure that you keep at least one line open in order to re-establish your credit.
Make sure that you repay the balance on your credit card in full each month, or at least keep it under the 50% mark. This is to keep your credit utilisation low, which will have a direct impact on your score. Other things you could do is check if you’re registered on the electoral roll, as it will also have an impact on your ability to get credit. Make sure that you pay all bills on time, and check for possible errors on your credit report so you can make corrections if needed.
Credit Reference Agencies have a Say in Your Application
The job of credit reference agencies is to compile your information, that’s it. They don’t have an active hand in whether or not you will get approved. The lending institution will decide what they do with the information they get. So, part of the decision might come down to the loan officer or the institution’s set of criteria.
Conclusion
Credit doesn’t have to be complicated, and the more you know about it, the better you’ll be able to use it. Make sure that you learn as much as you can about how credit works, and work on building it the right way.
