Last week I began to bust some of the common myths that surround car loans and finance. I covered escaping bad credit, credit checks not damaging your score, credit cards and their effect on your score, not having debt and when to check your credit score. Today I’ll cover the other five common myths that we see here at Car Nation Canada.
Your score is your score
You don’t have just one credit score, you have several. The three main credit reference agencies Equifax, TransUnion and Experian all do it slightly differently. There are other minor reference agencies but they tend to take their data from these three or separate FICO and VantageScore users.
What one score might show, another may not. Different lenders may use different scores. Generally speaking, if you have a good credit score, it will be reflected across all of them.
Lots of savings helps your credit score
Not always true. If you’re savvy enough to save, you’re savvy enough for credit right? Yes in behavioural terms as it shows responsible financial acumen but that doesn’t necessarily improve your credit score. Levels of savings does not impact the score much on its own. More in that you will always have money to pay bills on time, which does benefit your credit score.
Always paying your debts isn’t just for Lannisters but for everyone. This most certainly will impact your score.
You share a credit score when you marry
Thankfully for many, this is not true. A credit score is a personal score and while you may be tied together in every other legal way, in this way, you’re on your own. That may work for you or against you but that’s how it is. That’s good news for most I think as we all value money differently.
No matter how long you are married or how tied together your finances are, your credit score is all yours.
Employers checking my score will lower it
Not true. Some employers do perform a credit check but those should be few and far between. Apply for law enforcement or a uniformed service, a job in the financial sector or in the legal profession and your credit history may be checked as part of a general security check. This is to assess potential for blackmail and not how you manage your money.
It is usually a soft inquiry so it won’t impact your credit score in any way. In many territories it is illegal for employers to perform a hard inquiry without good reason.
Constantly using my overdraft will impact my score
Not true. An overdraft is a pre-arranged line of credit that you can use as much or as little as you like. As long as you always pay it back and pay on time, using your overdraft will not impact your credit score. Students of the world rejoice!
The only way overdraft factors into a lending decision is in affordability. If you’re using up your credit allocation with an overdraft, the amount a lender might offer could be lower.