It is difficult to separate fact from fiction when there is a ton of false information regarding credit scores.

Here, we’ve sorted out the most common credit score myths and the actual truths as to what actually affects your credit score.

Credit Score Myths: Separating Facts From Fiction

Myth 1: Checking my credit report will lower my credit score

Fact: Checking your own credit report has no impact on your credit score at all.

Requesting or purchasing your own credit report has no effect on your credit score, as it is a soft enquiry and not reported to any credit reporting bureaus.

In fact, checking and reviewing your credit file will give you an opportunity to identify mistakes and fix any incorrect listings.

You can get a free credit report every 12 months from the major credit reporting bureaus in Australia.

Myth 2: I need a high income for a good credit score

Fact: It does not matter how much you earn, what matters is how you handle your credit.

It does not actually matter how much you earn, so getting a pay raise does not always improve your credit score.

People with high income can still have bad credit and those with low income can have a good credit score.

Credit reports do not show your income, and only have details like your name, current address and current employer.

What has more bearing on your credit score is how well you have used the amount of credit extended to you.

Myth 3: A large credit card debt will lower my credit score

Fact: Yes, but only if you have not been making repayments on your credit card. A bad repayment history on your credit card will lower your score.

While a large credit card debt is not a good thing, if you have been making repayments on time, then it shows lenders that you are a responsible borrower.

In Australia, only your credit limit is listed on the credit report, and not the credit balance.

With the adoption of Comprehensive Credit Reporting, your credit report will now have information on 24 months account repayment history of all your credit cards and loans.

Therefore, if you have regularly made repayments on time, then it’s an indication to a credit provider or lender that you can manage your debt and finances.

Myth 4: Paying phone bills on time will improve credit score.

Fact: It does not improve your credit score as it is not recorded as part of your repayment history.

Only the banks, credit unions and other financial institutions can give their monthly payment history to the credit reporting bureaus.

Since gas, phone and electricity providers are not privy to do so, regularly paying utility bills will not show positive credit behaviour.

However, if you have not paid utility providers within 60 days and the amount due is more than $150, then it will be listed as a default on the credit file.

Myth 5: Once I get married, my partner and I will share the same credit score

Fact: Each individual has their own credit score. Whether you’re married or in a de facto relationship, you will each have your own credit score.

While you have made vows to stay together in holy matrimony, your credit scores will still stay separate from each other.

You and your spouse will not share a credit score just because you’re married.

However, if you open a joint account, or apply for a home loan together, then both of your credit scores are affected and a spouse’s bad credit could lead to an application being denied.

Therefore, it’s best to get a credit check before you start applying so both parties are aware of their credit health and issues to be rectified.

Myth 6: A default will stay on my credit file forever and lower my credit score.

Fact: Defaults stay on your credit file for 5 years.

While having a default will lower your credit score, it will fall off your credit report after 5 years, so it does not stay on your credit file forever.

Even if you’ve paid for the default already, it will remain on your credit file, but it will be listed as a paid default.

Paying off your defaults is an indication to the lender that you are moving towards improving your financial stability.

Furthermore, once your defaults are paid and all the negative events from your credit file fall off, then it will boost your credit score.

Myth 7: A high credit score means better rates on my home loan.

Fact: You will get the same benefits as an individual with an average credit score.

A high credit score will still get you the same interest rates on your credit card and mortgages as a person with an average credit score.

Up to a certain point, your credit score matters. However, once you cross that threshold, it doesn’t matter as much.

The risk-based pricing model of the United States has not been implemented in Australia, so a higher credit score does not get you lower interest rates on your home loan.

Myth 8: Since I don’t have a credit card or applied for any loan, I have a good credit score

Fact: A non-existent or limited credit history will lower your credit score.

Many people believe that not borrowing means that they have never been in debt, so they have excellent credit scores.

However, without a credit history, credit providers and lenders are reluctant to approve your application as they have little to no evidence about how successful you are in managing your finances and paying off debts.

Your credit history is a good indicator of how well you can manage credit in the future.

Myth 9: Shopping around for credit has no effect on my credit score

Fact: Every time you apply for a credit card or loan, it will be listed on your credit file and affect your credit score.

If you have too many enquiries on your credit file in a short period of time, then lenders will see you as a high-risk borrower.

Each time a potential lender views your credit file, it will be listed as an enquiry and can lower your credit score.

Therefore, it is good to space out your credit applications and only apply for it when you can take on the account.

A general rule is up to two applications every six months.

Since we’ve debunked the credit score myths that you fall prey to, there are many ways you can improve your credit score too.


Now that you know some of the common credit score misconceptions that can lead to bad decisions, it’s time to avoid these mistakes and manage your credit responsibly.

Get in touch with our brokers who are credit experts and know the credit requirements of different banks and lenders.

Call us at 1300 889 743 or fill in our free enquiry form.

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