10 credit myths – busted!

When you get your credit facts wrong, it is all too easy to make poor decision about your money. We set the facts straight on 10 myths about credit and credit scores.

1. All credit is bad/all credit is good
   Neither of these is true. Credit is just credit; what you use it for, is what makes the difference. If, for instance, you take out a loan to renovate your property, you are adding long-term value. On the other hand, a loan to buy fashion-statement shoes is most definitely bad debt. When, having repaid your loan, you cannot pinpoint where the money went and you have nothing tangible to show for it, you know that it was bad debt.
2. To survive in South Africa, you need debt
   These days it certainly feels like it, but it is not true that debt is the only way to make ends meet. Credit should never be part of your plan to meet your normal monthly expenses; credit must have a specific purpose. So, instead of making credit your plan, invest in learning more about managing your personal finances and put healthy money habits in place.
3. Credit reports are expensive to check
   Every credit bureau must give you one free credit report every year. You can get yours directly from a credit bureau such as Experian, TransUnion or CompuScan, or through Bayport when you enrol in Bayport Money Solutions.
   It’s important to check your credit report every year so that you can catch and correct any mistakes as soon as possible.
4. A poor credit record means I can never borrow again
   Not true. Your credit report reflects your credit history, including details such as your credit accounts, repayment history, credit inquiries and any judgements against you. This means that as your behaviour improves, your credit score improves over time. It does not happen overnight and you have to work at it, but as your credit score improves, your ability to borrow will improve too.
5.  I can pay someone to “fix” my credit score
   Never, ever believe this! Anyone who promises to fix your credit score, if you pay them, is lying to you. The truth is that if the information on your credit report is accurate, no one can erase it. However, you have to make sure that all the information on your report is correct. If there are any errors, you must contact the credit bureau immediately to correct it. The only way to improve your credit score is through good credit management.
6. Making minimum repayments will reflect poorly on my credit profile
   Making larger repayments and paying off debt earlier can improve your credit score over time, as well as save you money on interest. However, it is always better to make the minimum repayment than to not pay at all. Minimum payments will not harm your credit score as long as you don’t fall behind.
7. Getting a job depends on my credit record
   When you apply for a job, the company has the legal right to check your credit record to ensure that there are no legal judgements, including fraud cases, against your name. However, you must give your permission for this check to be done. If you have a poor credit record because of late payments, the company cannot use that as a reason to turn down your application.
8. The credit bureau turned down my loan application
   Credit bureaus do not make decisions on granting or declining credit; they only provide
   information about a person’s credit behaviour.
9. Credit bureaus blacklist people
   In terms of the National Credit Act, credit bureaus do not “blacklist”people. Instead, credit bureaus collect and maintain credit information about individuals to help credit providers assess their creditworthiness. If someone consistently pays late or not at all, this information will have a negative impact on their credit profile and make it more difficult for them to get credit in the future. Credit bureaus do not decide if someone can get credit or not. Credit providers use the information provided by credit bureaus to make their own lending decisions.
10. My income, age and marital status influence my credit score
    Not true. Neither your income nor your marital status has a direct influence on your credit score. The only way in which your age makes a difference, is in terms of the time you’ve had to build up a credit record.