Managing my money for young adults
Managing my money for young adults

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5 Credit assessments: myths and facts

There are quite a few misrepresentations of how credit assessments are formed. Have a go in the next activity at separating the myths from the reality.

Activity 4 Myth or fact?

Timing: Allow about 10 minutes

Which of these are facts and which are myths when it comes to credit assessments?

  • A.National credit blacklists exist
  • B.Having no credit history is a drawback
  • C.Having borrowed from many lenders helps
  • D.Student loans impact on ratings
  • E.Not using the credit cards you already have is a problem
  • F.Previously declined applications count against you
  • G.Your credit file influences the interest rate you get
  • H.Paying a utility bill late can hit your rating


OK, let’s look at which of these are myths and which are facts.

Table 2 Myths and facts about credit assessments
Myth or factFeedback
National credit blacklists existMyth – no they do not exist.
Having no credit history is a drawbackFact – without a history there is no proof of your creditworthiness.
Having borrowed from many lenders helpsFact – this indicates that many lenders have already approved your creditworthiness and provides information for credit reference agencies to make assessments.
Student loans impact on ratingsMyth – they are disregarded when it comes to credit scoring. Lenders – particularly mortgage lenders – will, though, take student loan repayments into account when assessing how much they are prepared to lend to you.
Not using the credit cards you already have is a problemFact – if you have unused cards then you have unused credit capacity that is available for you to use. The perceived risk is that you may use this capacity to go on a spending spree, amassing debts in the process that you then have difficulty repaying.
Previously declined applications count against youMyth? – A trickier one. Lenders might ask if you have had other applications to borrow money declined in the recent past. The credit reference agencies will keep records of how many applications you’ve made for credit but not of the numbers accepted or rejected. However they may be able to detect how many have been accepted by the record of the accounts you have open.
Your credit file influences the interest rate you getFact – increasingly lenders are adopting risk-adjusted pricing when it comes to debt products. The better your credit scoring the lower can be the interest rate you pay when you borrow money.
Paying a utility bill late can hit your ratingFact – increasingly the credit reference agencies are accessing data from utility firms and ‘phone companies. If you are a late payer of bills this could hit your credit rating.
Adapted from (2017)

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