Credit score myths busted

Credit score myths busted

Posted on July 12, 2022

Information is good, but then we must have the right information to make informed decisions. There are so many established myths in the world today. In this article, our Waterford auto loans team will be demystifying some myths about credit scores.

All to help make your car buying journey that little bit easier.

What's a credit score?

Just like it sounds, a credit score results from an assessment made by a lender from the borrower's credit report. It lets the lender know how likely you will pay back what you want to borrow from them.

A good credit score is of great importance if you want to buy a new car in Canada. It is required by banks, car dealerships and many loan companies.

This is why you must get your facts right.

Credit score myths and the truth about them

• Education level affects credit score: This is untrue. An individual's education level is not related to how likely they can pay back the debt owed, so it's not included in their credit report.

Therefore, there is no way it can impact the credit score. The information you can find in credit reports includes payment history, current debt, credit card, bankruptcy etc.

Also, factors like age, gender, religion and marital status do not affect credit scores.

• A bad credit score can never be rebuilt:  Unlike what many believe, no matter how bad/good your credit score is, it can always be improved.

Even if you've had a long track of bad debts, they can be turned around with time. In Canada, missed payments stay in the credit report for 6 years, so rebuilding a credit score like this would require you never to miss a payment again.

You may need to learn a little about money and credit; you need to have a long credit history without any negative information.

When lenders see a long encouraging credit history, it's almost certain that they would be impressed and view your old history as insignificant.

• Credit cards are nothing to worry about until you're old: This is another myth you shouldn't believe. In Canada, once you're 18 years of age, you're free to apply for credit, which means you need to be careful about your credit score.

It's recommended that you begin to build a good credit history right from scratch, so you can confidently ask for anything you want when you need it.

• Your credit score is the same: This is so not true. Your credit score is not definite. That one lender calculated and showed you a credit score does not mean that it's the same credit score other lenders will arrive at when calculating your creditworthiness.

However, with one or two credit scores from different lenders, you should have an idea of what your average credit score looks like.

When you’re ready for a car lease or loan, get in touch with the Waterford auto loan experts at Northway Ford for great deals on auto finance.