The Bad Credit Rating Mythbuster

Credit ratings can affect so many aspects of our lives, but the way they work often isn't fully understood, so it's not surprising that there are a lot of myths circulating about them.The Bad Credit Rating Mythbuster aims to provide some clarity on the most common misconceptions around bad credit, help you sort fact from fiction and avoid wasting your time and effort on things that might not be effective in improving your credit history.

Myth 1: The 'credit blacklist'

 The idea that there is a 'blacklist' circulated around the industry that tells lenders who to avoid lending to is completely untrue, but it probably stems from the way credit scores are calculated. Lenders will check customers' credit reference files after receiving an application for credit, and if the credit file  contains a lot of negative information – such as missed payments or court fines for non-payment – the lender will probably refuse the application.

Since every lender is required to check customers' credit reference files, it's easy to see how someone who's had a string of rejections from unrelated companies could think they're on some kind of blacklist – when in fact it's just their own bad credit history standing in their way.

 

Myth 2: The previous occupants at your address will affect your file

 You may be getting letters about unpaid bills or outstanding credit card balances addressed to the previous occupants, but as long as they don't have your name on them, there's no link between them and your credit reference file, which is based on your bank accounts and borrowing activity – not your address. However, it is a good idea to make sure credit reference agencies have your correct address on file, and that you're on the electoral roll, as these things are usually checked in any credit application.

 

Myth 3: Friends and family living at your address can affect your credit rating

  Having a permanent address will help to make you more attractive to lenders, but the people living there should have no impact on your credit rating as long as they're not financially connected with you. However, if you have a joint bank account, mortgage or shared tenancy with your spouse or other individuals, lenders will probably check their credit history as well. This could affect your credit application, as their past financial behaviour could potentially affect your finances too.

 

Myth 4: You'll have a better credit rating if you've never borrowed money

⏩  In fact, you might have no credit rating at all! This isn't always a problem - if you can prove to the lender that you have enough income, a history of paying bills on time, and so on, they might still consider your application. But without any borrowing activity on your credit file, it's difficult for lenders to get an idea of what you're like and how well you manage money. Someone who's borrowed and repaid on time looks better to a lender than someone who's never borrowed at all.


Myth 5: You can't get credit if you have a bad credit rating

⏩  A bad credit rating limits your options, but it's very rare that it can cut you off from credit completely. Every lender has a different set of preferences for who they lend to, and some will be more tolerant than others. In fact, one of the best ways to improve a bad credit rating is to get a product designed for people in your situation – such as the Vanquis Credit Card. Vanquis specialises in helping people with ‘bad’ credit histories (or no credit history)- so even if you've been turned down by other lenders, find out if we can help you today.