Over almost 30 years now of assisting people with debt and credit issues, I have heard, what I'd like to think is it all. But one can never hear it all, however, I have heard a lot, and been asked many questions.
So while I cannot possibly cover all of the questions and "myths" I have heard over the years, I thought with this guide it would be good to address as many as I can.
Myth! There is no such thing as a "blacklist" or people being blacklisted due to having weak or poor credit.
A person may be denied credit due to having a low credit score, poor credit, or not meeting the lending criteria of the lender, but there is no list of people with bad credit.
Another myth, but with a couple of caveats.
I have heard many times over the years why someone will not marry or move in with their partner due to their debts and/or bad credit. They said as soon as they get married, they take on these debts.
Many felt as soon as they moved in to live together it would affect their credit as well.
The caveats are this:
a) If you have joint accounts together, there can be an issue if one person or both people don't make the payments, as the account can be reported on both credit reports.
b) If you reside together at the same address, there can be issues where the address used for someone to apply for credit comes up. This can be remedied by having the lender in question look further at the application, and the person applying, and if need be a Notice of Disassociation can be placed on the credit report of the partner/spouse who has good credit.
In the course of going bankrupt your employer is not notified. The only time your employer may even have an idea you that you have gone bankrupt is if an NT tax code is issued by the Official Receiver.
This code means no tax is to be taken out of your wages. The tax that would be paid is to be paid into the bankruptcy. I have not heard of this being done much lately.
Somewhat not true, and I'll explain.
The OR in your bankruptcy does not contact your landlord expect under a couple of circumstances:
a) You are in arrears with your rent, in which your landlord is one of your creditors as you owe them money.
b) If the OR requests a copy of your tenancy agreement, and you cannot provide one, the Receiver may, and I say/write MAY, contact your landlord to confirm you do not have an interest in the property.
The only issue a bankrupt may have with their tenancy is some tenancy agreements have a clause that allows the landlord to request you leave should you go bankrupt. There are those that feel the bankruptcy brings a blight on the address. You would need to review your tenancy agreement, if you have one, and make a decision from there.
False. Bankruptcy stays on your credit history just the same as anything else, six (6) years.
This myth may stem from the fact if you are asked the broad question, "have you ever been bankrupt?", do you disclose the fact or not.
Many mortgage applications do not ask if you ARE bankrupt, but if you have EVER been bankrupt.
If you inserted six (6) or more years, you may be correct in that if a creditor has no contact with you for over six years, an account can be statutory barred. This means it is no longer owed.
Based on the Limitation Act 1980, a creditor has six years to try and collect a debt.
However, there are some grey areas to this, such as if the creditor has attempted to contact you, but you have not provided them any new details if you have moved.
In addition, if a CCJ was filed, this can negate the limitation act.
Also, secured loans have a 12 year limitation period.
This is a question I have heard many times, my ex was to pay an account we had together, they have stopped paying, and now the creditor is contacting me for payment.
Unfortunately if the account is a joint account, in both names, or you guaranteed the loan, both parties are equally responsible for the payments.
The divorce decree does not remove or take away both parties responsibility for the account. So if the divorce decree states one person is to pay the debt, and they fail to do so, the creditor can seek payment from the other person.
If we refer back to our credit score pie chart we can see that account balances make up 30% of your credit score. Carrying a balance in no way improves your credit score. It is just a myth.
If your credit card company offers you an increase in your credit limit, take it. This doesn't mean use it, but take the increase.
Of course the card company is hoping you will use the increased line of credit, and make more money off you. However, by taking the increase you may actually improve your credit score.
The increase of credit changes your "utilisation ratio".
Here is an example:
You have a credit card with a £3,000 credit limit and a £900 balance. This gives you a ratio of 30%
If the bank increases your credit limit to £4,000, and you keep the same balance, your ratio is now 23% or lower.
Amounts owed accounts for 30% of your credit score, by keeping a lower ratio, your credit score can increase.
These are just a few, of the many credit myths and frequently asked questions I have heard over the years.