11 Myths About Credit History and Whether You Should Believe Them

We’re busting the most popular misconceptions about credit history and, at the same time, investigating whether a good credit record always guarantees you a loan.

Myth 1. No loans — no credit history

There’s a belief that if you’ve never taken out any loans, then you don’t have a credit history and no information will be returned to a credit bureau when a bank checks. That’s not entirely accurate. Having no loans means a “zero” credit history only for very young people or those who have never had problems like unpaid maintenance, utility bills, import duties, and so on. In that case your personal file likely exists, but there’s no data about loans in it.

Information is most often submitted to a credit bureau by the banks themselves. In a standard case, when you open a debit card, you consent to a credit-history check. The bank makes a query, the information goes to the credit bureau and is recorded. Data about unpaid maintenance or fines is sent to the bureau by legal enforcement agencies.

A zero credit history is, of course, better than a history with delinquencies and rejected applications — but this “blank slate” can still create difficulties. If you plan to apply for a car loan or a mortgage in South Africa (or with a South African lender), it’s best to build a positive credit history and a good score in advance. Take out a few small loans or payment-plans, say for furniture or household appliances, and repay them carefully.

Credit history is reviewed not only by banks: employers also look into it, especially when hiring for financially responsible positions. Insurance companies and other entities may also request it.

Myth 2. If your credit history is good, your loan will definitely be approved; if it’s bad — then definitely not

That’s partly true — but not the whole story. Credit bureaus compute a personal credit score for borrowers, reflecting the quality of their credit history. The higher the personal credit score, the higher the chance you’ll get loan approval.

But statistics show that even those with a high score get approval only about 70% of the time. That’s because the personal credit score accounts only for the data found in the credit history — whereas a South African bank also assesses other parameters: the borrower’s income, assets, employer, marital status, number of dependants, etc. So a positive credit history is a strong support, but not a guarantee that the loan will be granted.

Conversely: a bad credit history doesn’t necessarily mean you’re doomed. With a low personal credit score, getting a loan — especially a large one — becomes difficult: such applications succeed less than 20% of the time. But it’s still worth a try.

To persuade a bank to overlook a poor credit history, you’ll need strong arguments: a good asset as collateral, a high stable income, several guarantors.

Myth 3. Micro-loans damage your credit history, and you won’t get a regular loan afterwards

This is somewhat exaggerated — but South African banks indeed are cautious about borrowers who use micro-finance institutions. It is assumed that such a client may be unable to properly assess their financial situation and is forced to “patch up” funds with micro-loans.

However: having repaid micro-finance institution loans on time does **not** negatively impact your credit history — and may even improve your personal credit score.

Keep in mind that micro-loans also include instalment plans offered by some online marketplaces.

Myth 4. Small late payments don’t affect your credit history and won’t show up

All payment delays—even by just a few days—are fixed in the credit history. But your credit score won’t drop if you close them immediately.

The bigger question is how a South African lender treats this information. Usually the lender allows a permissible limit of small delays: for example no more than 3–5 delays up to 30 days in the last year. They don’t typically distinguish between a 2-day or a 20-day delay.

So if you were late a payment by a few days a couple of times a year — it will likely not affect your credit history nor the bank’s attitude. But regular long delays — more than a month — will definitely impact your credit history and make obtaining loans more difficult in future.

Myth 5. If you settle a delayed loan, your credit history will immediately improve

No — your credit history doesn’t correct itself immediately. The process may take up to a year — depending on how badly it was damaged.

To improve your score you need time without delays, and the longer that period, the better. Also, rejected loan applications hurt your score, so it’s better not to submit new applications for a few months.

Myth 6. A large number of applications worsens your credit history

This myth has some basis. Submitting many applications in a short period can indeed deteriorate your credit history. Each application must be reported by the bank to at least one credit bureau, so if there are many, and some ended in refusals, this will lower your personal score.

There is a caveat: this doesn’t always apply to an auto-loan, mortgage or store finance, because the scoring system recognises that the borrower is just shopping for the best offer. But in practice, even 10 mortgage applications can reduce the score — so you shouldn’t overuse them.

Myth 7. You can fix your credit history for money

Credit bureaus do indeed correct technical errors in your credit history. For example: a loan appears that you didn’t take, or a delay is listed that didn’t occur, or a long-paid loan suddenly shows as active. On your request the bureau will contact the bank, investigate and correct the information. This service is free, but can take up to 20 days.

This is the only case where you should keep proof of loan closure and other documents that confirm your payments.

But if someone offers for money to “clean up” a damaged credit history, to somehow remove unwanted records or reset it entirely — that’s definitely a scam. It’s impossible, because even within one bureau, data changes only after lengthy procedures. And changing your ID or name won’t fix the history — these are only identifiers, not the full record.

Myth 8. Credit cards are not counted in the credit history

No — a credit card is just like any other loan. Information about it will definitely appear in your credit history. Moreover, having such cards — even if you don’t use them — increases your debt burden ratio, which is calculated when you apply for a loan. For banks a credit card is a current financial obligation.

Myth 9. Over time your credit history is wiped clean

Credit bureaus are indeed required to store borrower information for several years — but this is counted from the date of last change. That means any query to your history from a bank or employer resets that clock and it starts again. So don’t count on your history being deleted or the bank being unaware of a long-term default from many years ago.

Myth 10. Not all loans appear in your credit history

All official loans are reflected in the credit history. Banks, micro-loan and micro-finance institutions licensed in the country must submit data to credit bureaus about applications, decisions and repayments.

But a loan will not appear in the bureau records if it was taken from an entity that’s not a recognised lending institution — for example, from an individual or organisation not licensed for lending.

Myth 11. Early repayment worsens your credit history

No — credit history is harmed by unpaid debts, unclosed obligations, restructurings — but early repayment does not negatively affect it. It deprives the bank of part of its profit, that’s true, but it may re-lend the money, often at better terms, so its overall income may even increase.

Information about early repayment will appear in the credit history—but only as a record. It won’t worsen your record. It is possible, however, that one particular bank might decide you’re not a desirable borrower, but that has nothing to do with your history.

Summary

Your credit history is a reflection of your financial discipline and responsibility. The modern system of interaction between banks, authorities and credit bureaus in South Africa is designed so that data on borrowers is updated quickly, meaning hiding mis-steps is unlikely. Relying on the expiry of time to wipe your credit history is even less sensible, as is believing in some mythical hacker who can “erase everything”.

Don’t trust rumours — it’s better to take real steps to fix your credit history: it is quite achievable, though the process will take some time.

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