Lies are temporary solutions to permanent problems.
We’ve heard this a thousand times but still fall prey to lies every day. We don’t blame you; it’s hard to uncover lies when they are disguised as facts. That’s what happens with credit scores. Over time, people have come to believe some “facts” about credit scores that are nothing but lies.
Following these “facts” will not only dwindle your knowledge about credit scores but might also land you in debt or lower your credit score. We’re now going to take you through some of the popular myths about credit scores and credit reports.
1. Checking your credit score multiple times will affect your score
It is true that every time a hard enquiry is made regarding your credit score, it gets recorded in your report. However, the same does not hold true when you are making an enquiry regarding your own credit score. The truth is that you can check your credit score as many times as you please. It will have no impact on your score as long as you are doing so directly with one of the credit bureaus.
But if you get a copy of your credit report through other means such as lenders or credit card issuers while applying for a debt product, they qualify as hard enquiries. These will definitely impact your score.
2. You need to earn a high income to have a good credit score
How much you earn has no or very little impact on your credit score. The truth is that your debt-to-income ratio is what will be considered as one of the factors to determine your credit score.
To maintain a good credit score, all you need to do is to make your repayments on time. Oh, and keep your credit utilisation in check.
3. Credit scores from different companies are the same
There are a few credit rating companies in Singapore, CBS being the most prominent. What most Singaporeans believe is that all the Credit Information Companies (CICs) give the same credit scores.
That’s not true in any way. The data collected by each CIC is different from another. Hence, the credit scores given by these companies vary too. While CBS might give you a credit score of 1,300, the DP Information Group might award you a score lower (or higher) than that. The score varies with each CIC.
While it is true that the scores may be comparable to one another, that they will be the same for the same credit behaviour is untrue.
4. Paying off debt will wipe out your bad credit history
No matter how hard you try, you can never erase your past. The memories will always haunt you.
We didn’t mean to get so melancholic but it is true. Some things can never be erased, like your history of late payments, defaults on payments or a bankruptcy proceeding. Many assume that paying off a bad debt will obliterate it from your credit report. It is true that paying your debt can increase your credit score, but it definitely won’t wipe the record off your credit report.
Actually, each kind of credit behaviour remains in the report for certain durations. Here is a brief summary of how long information about your credit behaviour remains on your credit report:
|Type of information||Duration it stays on the report|
|Ongoing loan account history||12 months from date of activity|
|History of closed/terminated loan accounts||3 years from date of closing|
|Previous hard inquiries||2 years from date of inquiry|
|Default records||3 years in case of Negotiated Settlement or Full Settlement
Indefinitely in case of Outstanding, Partial payment, or Sold off
|Debt Repayment Scheme and Bankruptcy records||Until next status change or for 5 years|
We understand that it is hard to separate the lies from the facts. But it is imperative that you do it when it comes to your credit score, as not doing so could destroy the numbers.