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Bad Credit Mythbusters
2nd December 2019
It's now easier than ever to access your credit score, but that doesn't mean there aren't still plenty of myths surrounding bad credit. Having a good credit score shows potential lenders that you are less of a risk and in turn, gives you more financial freedom in the future, whether you want to apply for a cash loan or take out a credit card. Let's look at five different factors and determine which ones may have a negative impact on your credit score and highlight the ones that may not. If you want help improving your credit score check out our previous blog here.
Could my mortgage payments affect my credit history?
Let’s start with what is most likely your largest monthly payment, your mortgage; missing a single mortgage payment may have a negative impact on your credit score.
Several factors make up your credit score and missed payments is one, so if you do miss a mortgage payment then your credit score may drop. Missed mortgage payments will stay on your credit report for up to 6 years so it’s important to make timely payments each month to avoid the risk of having a bad credit score.
Will having an account overdraft influence my credit report?
If you have an overdraft facility connected to your current account, you may be wondering if this could be having a negative impact on your credit score. An overdraft won’t affect your score directly, however this may change in the future. An overdraft is viewed as a potential debt by lenders, if you are regularly ‘over’ your limit, it could be an indication that you are struggling to manage your finances and could be enough to deter some lenders.
Will taking out a student loan lower my credit rating?
One of the most common myths surrounding bad credit is that your score can be affected simply by having a student loan. Taking out a student loan with the Student Loans Company can seem like a daunting prospect, but can it affect your credit score? This student debt isn’t recorded on your credit file so if you have accrued a large amount of debt with the Student Loans Company because of higher education, rest assured, this will not affect your credit score.
Will a credit card affect my credit score?
Simply having a credit card will not contribute to a poor credit score, in fact, it may work in your favour if you spend sensibly and make your payments on time. Making a late credit card payment or missing a payment altogether will likely result in a negative effect on your credit score.
The amount you spend on your credit card each month may impact your credit score, but the golden rule is to keep balances low and never miss a payment.
Applying for multiple credit cards at once or having an excessive number of credit cards will likely have a negative impact on your credit score as it may look to lenders that you are reliant on credit.
Does my age impact my credit score?
Often people believe that the younger you are the worse your credit score will be; however, age may not dictate this. Credit scores are based on the financial decisions made by individuals and evidence whether they can make repayments on borrowed money.
