If you’re turned down for a loan or credit card because of your credit score, you’re not the only one. Bad credit is something that affects millions of consumers in the UK. But there are a lot of myths and misconceptions that could actually be holding you back without realising it. So, here are some of the facts about your credit score – and how it works – that you need to know.

What is bad credit?

First, it’s helpful to know what ‘bad credit’ actually means. For many, it sounds worse than it is too. Having bad credit simply means that your credit history isn’t spotless or perfect. And there are many reasons for this. Maybe you once missed a credit card payment? Or never applied for credit before? It’s not something to be ashamed about and you can do something about it.

Now, let’s dispel some of those bad credit myths.

Myth #1: It stops you getting credit

Yes – a score is used by a lender to help them decide if they can offer you a loan or credit card.

No – it doesn’t mean instant rejection or that a credit product is off limits to you.

You may still be able to get that loan or credit card you apply for. But the interest rate might not be as low as advertised. And, with lenders who specialise in products like bad credit loans and credit cards, credit may still be available to you if and when you need it.

Myth #2: You have one universal credit score

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The UK has three main credit reference agencies (CRAs): Equifax, Experian and TransUnion, and each one gives you a different score based on their own way of doing things. In addition, not all lenders use the same CRA.

It’s also worth knowing that your credit score is not the be all and end all of your application. It can be used to give the lender an idea of your financial health. But they also have their own set of reasons for approving or turning down someone.

Myth #3: You should avoid checking your score

The truth is the complete opposite. You should check your score on a regular basis. Not enough do this, though. In fact, four million Brits admitted they only checked theirs for the first time as a result of the coronavirus lockdown.

An “inquiry” goes on your credit report each time someone looks at it (including you). The only reason this could affect your score is if it’s related to an application and what’s called a “hard search” is completed. If it’s just you checking up on your score, there’s no impact whatsoever.

There isn’t any impact on your score if you use a lender’s eligibility checker either. These tools perform a “soft search” or inquiry of your file – and usually tell you if you’ll be accepted before you submit an application that involves a “hard search”.

A good reason for checking your score is to find out if there are any errors on your report. If you do spot something that doesn’t look right, get it fixed. It may be holding your score back.

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Myth #4: Student loans can affect your score

Around half of people who completed a survey by Dot Dot Loans believed that a student loan can have an impact on your credit score. But it’s not the case. Your student loan repayments come out of your wages and don’t show up on your credit report – so it has no effect on your rating.

Myth #5: All debt is bad

It’s easy to think that taking on any debt is bad. You’d be wrong to think that, however. Debt you owe on a mortgage, for example, isn’t the same as a large credit card bill.

That’s because a mortgage may suggest that, as a homeowner, you’re making a responsible long-term investment. Meanwhile, the other might seem as if you’ve been on a short-term splurge which may not make you look like a sensible borrower.

Myth #6: Other people could hurt your score

Living with someone won’t have any bearing on your credit report. It’s completely personal to you. The only time someone else could ever have an impact on your score is if you apply for a joint product. The same applies to when you’re in a relationship – the only way a credit report can be linked to another is through a joint application.

Myth #7: You could be on a credit ‘blacklist’

The simple answer is “you’re not”. There’s no such thing as a credit ‘blacklist’ – even though 72% of consumers think there is. If you’re turned down for a loan or credit card, it’s because you don’t fit their criteria at that time – not because you’re an instant red flag.

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By debunking some of these familiar credit score myths, hopefully you’re much more confident about yours – and what it means for your future. A credit score can be an important and useful sign of your financial health. So, it’s a good idea to do what you can to build it up – but not be too worried if yours isn’t in the best shape right now.