27 MARCH 2019
Common Myths About Bad Credit
When one thing leads to another, unexpected expenses cause you to miss bills. These then begin to add up – and in the worst case, your whole financial position can become threatened. It doesn’t take long for a few missed payments or a default on a loan to affect your credit rating, which makes it harder to get credit extended in the future. That’s what a credit score is there to do - to measure the risk a credit provider takes on by lending to you.
However, word on the street is that credit scores can affect a whole lot of other things, and some stories you may have heard are plain urban legend. Separate fact from fiction and wise up, so you know what’s true about bad credit - and what’s just another myth.
Myth 1: You can’t get a loan
People believe this myth because it seems obvious - don’t you only have a credit score so that banks and lenders can make a judgment about whether or not to lend you money? Well, yes - a bank may deny you a loan based on a credit score, even if it resulted from something that happened years ago and you’ve now got a good income and responsible practices.
The good thing is that you can get bad credit loans specifically designed for your situation. With these loans, the lender will assess your income and expenses to decide how much they can lend to you - no credit checks required.
Myth 2: It affects your chances of getting a job
This is an exceedingly common myth blown up by the fact that it is true in some other countries, but in New Zealand, a potential employer doesn’t have to check your credit score. This is a clear-cut truth.
The only exception is when you are applying for a financially sensitive job. Even then, they still have to ask you to consent first. If you didn’t sign to give your permission for a check, they won’t know anything about your credit history.
Myth 3: A credit score is one, centralised thing
So, what is your ‘credit score’ anyway? Are they kept on a giant central database in the government’s offices? In reality, your score depends on which firm you ask. Companies who provide you with credit or billed services keep track of your history with them, and this information is centralised by several companies who use it all to assign you with your score.
Often, someone examining your credit will actually be looking at a detailed report of your credit history, but it is not uncommon for a bank or lender to base a variety of decisions off of little more than the number of your credit score. Ultimately, a high credit score will tell your lender much of what they need to know.
Myth 4: It hangs around forever
There is no overnight fix to bad credit, but it’s total fiction that it will stay with you forever. Your credit is constantly adjusted as you deal with credit over time, so whenever you pay bills or pay off a loan on time, it’ll go up. Taking out a no credit check loan and paying it back will improve your standing, as will consolidating all of your debts into one, which several financial service providers can help you with.
You can’t fix bad credit with the wave of a wand, but the sooner you start being responsible with your finances, the sooner your credit will start to improve.
Been blue over bad credit?
Things happen, we get it. Plenty of people get into bad credit for one reason or another, and often this doesn’t reflect their current situation. Fortunately, a lot of the problems you may have thought you had with bad credit aren’t quite true.
If you need a loan but you don’t have the credit to get one from the bank, we can help - and when you pay off your loan with us, your credit score will reflect that you have used credit responsibly. Get in touch with us and you could have money in your account soon - and that’s not another myth!