One quick search will show you that there is plenty of information available online about credit scores and credit ratings. For instance, you’ll find all you need to know about credit scores in the UAE.
But what about all the fake information on the internet? How do you know what is true and what isn’t? It’s difficult to differentiate, and unfortunately, there are plenty of myths about credit scores online.
If these have been keeping you awake at night, this blog will help clarify some common misconceptions about credit scores.
Let’s take a look at the most common myths about credit scores.
Bad Credit Scores Mean Your Application Will Never Be Approved
A bad credit score can make it difficult to get approved for a loan or a credit card. However, a poor credit score doesn’t mean that your application for credit will always be rejected. Some banks and credit card companies accept lower credit scores.
This is because your credit score is not the only aspect financial institutions look at. Other factors they use when evaluating your creditworthiness include your current level of debt, monthly income, and credit card history.
A Bad Credit Score Never Goes Away
A bad credit score can stay with you as long as you continue to do things that negatively impact your rating. This includes late or missed payments, defaulting on payments, maxing out your credit card, and filing bankruptcy.
However, you can improve your credit score. A bad credit score is not permanent. Paying bills and taxes on time and reducing your outstanding debt are simple ways to gradually improve your credit score.
Higher Income Correlates To Higher Credit Scores
Many people believe that the higher their income, the better their credit score. However, this is not necessarily the case.
A stable, higher income gives people the ability to easily make repayments. Whether they make them on time is an entirely different story. Similarly, it’s also easy to be in debt despite a high income.
Debit Cards Can Help Build Credit Scores
A debit card simply allows individuals to make payments and purchases from the money they already have in their bank account. Therefore, it doesn’t influence your credit score, nor does it help build your credit history. On the other hand, credit cards do impact credit scores.
I Don’t Have Debt, So I Have A Good Credit Score
Sure, not having debt is one of the factors that can contribute towards a good credit score, but it is not the only factor. Various other elements such as payment history, the state of credit card bills, and punctuality of payments matter too.
I’m Too Young To Worry About My Credit Score
As soon as you’re old enough to apply for a credit card (typically at the age of 18), you need to be aware of your credit score. However, in some countries, financial experts recommend youngsters work on building credit scores even earlier—the longer your credit history and the steadier the credit score, the better.