In recent years, more people have become aware of the importance of their credit score regarding their financial future and managing their finances. Even people over 50 can find their financial situations affected by their credit rating. It can affect various aspects of our lives.
Given the impact your credit score can have on your life, it is vital to achieve and maintain a decent credit rating. However, you also need to be mindful of the various credit score myths in circulation these days. We will explore some of these in this article.
Some of the myths you may have come across
Some people find the world of credit reports and scores confusing. As such, it can be a challenge to understand them. The various myths that surround credit reports and ratings can add to the confusion. Here are a few of the ones to be aware of:
1. All debt is equal
When you are over 50, you may already have a mortgage that you are still paying. This can show up on your credit report and can be for a hefty sum. However, when it comes to your credit report and score, your mortgage debt is different from running up the same amount of debt on credit cards. So, not all debt is equal!
The amount of debt you have can affect your credit score, but it also depends on the type of debt. Some people believe their credit rating will be negatively affected no matter what kind of debt they have. However, as highlighted above, the impact can vary.
2. Your score is affected by checking your report
Many younger adults have entered adulthood with the knowledge that checking their credit report is essential. However, many older people never used to do this in previous years. Some are incredibly cautious about doing it even now!
Some believe that checking their credit report could damage their credit score, but this is untrue. Checking your credit report could help you improve your score because you can see where the problems are. You can also find and tackle any issues such as inaccurate information or suspicious activity that could be negatively affecting your score.
3. Credit scores are either good or bad
Many people think credit reference agencies have two categories that they place people into – those with good credit or those with bad credit. However, this is not how it works. While you may look at your score and think it is good or bad, for credit agencies and those that use them, your score is simply an assessment of risk.
So, the various credit reference agencies do not just have people placed into a good or bad credit category. Your credit score reflects your finances and your reliability when making payments on bills, debts, and other financial commitments. Businesses like lenders and other credit providers use your credit score to decide whether you are a potentially low or high-risk borrower.
4. Retirement accounts can impact your score
Some retirees believe their retirement accounts could affect their credit score, but this is not the case. Contrary to widely held belief, a considerable amount of information about individuals is not held on credit files. This includes information such as profession, disabilities, and ethnicity.
Other information not held on your credit file is the amount of money you have in your account or any information on your retirement accounts. Since this type of information is not on your report, it does not impact your credit score.
5. Credit repair companies can work miracles
Many older people have been brought up worrying about credit scores and reports. If they find out their score is lower than expected, they panic. Some then turn to credit repair experts because they believe they can work miracles – this is not the case! So, before you rush in and start paying someone to sort out your credit, try to take action yourself.
It is crucial to keep in mind that credit repair companies cannot do anything you cannot do yourself. They may get it done more quickly due to increased experience and knowledge. However, they cannot work miracles or remove genuine black marks from your file if, for example, you have an account in default or a county court judgment.
How can a poor credit score affect you?
There are many ways in which a poor credit score can affect your finances and other aspects of your life. It can have a significant impact on your ability to get any form of finance, from a credit card or personal loan to a mortgage or remortgage, car loan, or even catalogue finance.
In addition, if you want to rent a home, it could affect your ability to be approved for a tenancy. It could even affect your success with some types of jobs such as those in the finance sector, where you must work closely with money and finances. So, you can see what a dramatic difference your credit rating can make to various areas of your life.
Keep an eye on your credit report
Given the impact your credit score can have on your life, you must keep an eye on your credit report and rating. This is something that you can do with ease these days simply by going online. Not only does this help you to keep your credit score in check, but it can also ensure you pick up on mistakes and potential fraud that may be affecting your credit rating.