Don’t Fall For These 5 Common Credit Score Myths

The digital age has upended how lenders assess borrowers for doing business. It has been transforming the trend of credit offerings through strategies like credit score or digital credibility in general while making obsolete many traditional structures. For today’s lenders and creditors with an online presence, the old way of conducting business is no more sustainable. With that being said, there are still some misconstrued ideas about credit scores circulating in the borrower’s world that need to be straightened out.

Myth #1: Credit Reporting Agency Approves Loans/Credit

Absolutely false. Credit reporting agencies do not have the authority to make lending decisions. The credit reporting bureaus are in fact independent and commercial firms acting as a bridge between lenders and borrowers by providing the score or furnishing other details that the lender has asked for. They only provide credit information to the borrower or the borrower’s lender. Any approval or rejection is done by the lender irrespective of whether it’s a mortgage loan, an auto loan or any other kind of loan.

Additionally, the government does not own or control these bureaus, only protects the individuals’ rights to access credit reports. Any credit agency violating the rules can be subjected to fines.

Myth #2: High Salary Equates High Score

Not necessarily. Someone who earns a considerable amount of money but has poor spending and repaying habits can end up having a low score. What’s important to note here is that most lenders, however, prefer individuals with high salaries or net assets when lending money. In all other cases, the score is calculated based on payment history, amount owner, credit history length, and similar criteria.

Myth #3: Accessing Your Credit Report is Easy

This is another credit score myth that borrowers assume is true. Statistics suggest that banks and financial institutions are the ones frequently accessing your score. And more than half of those establishments accessing your score are local. Although your credit report is a great opportunity to gauge your financial situation and credibility, not all are given access to your report. In fact, accessing your report without your written consent is punishable under the law in most countries. Some employers may check reports of credit history during the hiring process. However, they don’t have access to scores unless they obtain permission from their potential employee or get a waiver to inspect the score.

Myth #4: Young Adults Don’t Need Credit Score

Young adults, or anyone over the age of 19, needs to start worrying about their scores. If you are a young adult out of high school or working a part-time job, in the likely event that you need to borrow at some point, you can start building your credit history by getting a credit card and repaying it on time. This will also let you learn how to manage your finances. You will be in a better position for obtaining major loans and maintain a good fiduciary relationship with your lender when you have started working on your credit history early on.

Myth #5: No Score, No Problem

One of the inevitable results of having a zero credit history is rejection from lenders and creditors. Individuals who never needed to borrow end up having zero or no record of a score. For instance, students who depend on their parents or guardians to pay for college and living expenses, do not see the need for a loan and hence don’t carry a credit card. However, unless someone has loads of cash stashed under a mattress, they may need to borrow money at some point for which they need credit history, to begin with. A borrower without a score will be perceived as a high-risk client by the lenders. It might be impossible to qualify for a credit, and even if they did, there is a chance that they will be slapped with a high-interest rate.


Remember that the best way to build up your credit history is to start by paying off any credit balance that accrues at the end of each billing cycle. This will not only improve your score but let the lender know that you are a responsible borrower. This is also the best way to decrease your credit utilization rate and boost creditworthiness, all of which can have a significant positive impact on your score.

AUTHORED BY: Naomi Olson [Twitter • Headshot]

I am a CFP® (Certified Financial Planner). I have a severe phobia of bridges and dirty balance sheets. Hobbies: blogging, meditation, and loving Bull Market (my dog).

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