Withdrawing cash impacts a person’s credit score.
Withdrawing cash on a credit card can negatively impact a person’s credit score. Withdrawing cash on a debit card does not impact credit scores, but it may affect a different financial measure called ‘affordability’.
A post circulating on Facebook claims that withdrawing cash will impact your credit score. This is only true for cash being withdrawn on a credit card, rather than a debit card.
However, it is true that withdrawing cash on a debit card can affect a different financial measure called ‘affordability’.
The post, which has over 3,400 shares, says: “So withdrawing cash will impact on your credit score because they can’t track what you are spending YOUR MONEY on. #BigBrother #KeepUsingCash #NoCBDC #CashIsFreedom Source: Clearscore App”.
CBDC stands for Central Bank Digital Currency. Full Fact has previously written about many false claims relating to this, including that the IMF has launched its own CBDC, the World Economic Forum is planning a “One World cashless currency” and that Sweden is abolishing cash.
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Cash withdrawals—also known as cash advances—can negatively impact your credit score. But this is only the case if the cash is being withdrawn on a credit card.
The post shares a screenshot of a page from an application called ClearScore. ClearScore is a financial service app that provides free credit scores, reports and spending analysis for individuals.
The ClearScore website explains: “Lenders might see [credit cash withdrawals] as unfavourable and poor money management, because they don’t know where the money is going, and because cash advances can indicate urgent need.”
It specifies that this is the case “when you take out cash from your credit card account”. Credit scores are not impacted by cash withdrawals on a debit card.
However, the screenshot shared by the Facebook post refers to an affordability score. While this is similarly affected by cash withdrawals, it is not the same as a credit score.
Creditworthiness and affordability are both ways that lenders assess a person’s finances but they relate to different things.
Credit scores consider whether a person has met credit repayments on time in the past. It can be based on information including the electoral roll, public records, financial associations (shared bank accounts) and home repossessions, among other things.
Affordability assesses whether someone can afford to repay the amount they’re seeking to borrow considering their income and outgoings. Bank statements and payslips are likely to be used as evidence. ClearScore offers an affordability score as a tool for its users to understand how lenders view their affordability.
A spokesperson from ClearScore told Full Fact: “The post [...] refers to a user’s affordability score, which is different from a credit score. [sic]
“Credit scores are taken from data provided by the credit bureaux (in our case, Experian) and relate to the creditworthiness of an individual based on past borrowing and repayment activity.”
“The affordability score is something unique to ClearScore and is provided when a user connects their bank accounts via open banking. It gives people an idea of how lenders might see them when applying for credit and is based more on income and spending patterns.”
Text in the screenshot shared in the post explains that Clearscore’s affordability scores are affected by withdrawing cash because “lenders like to understand your monthly costs so they know you’ll be able to keep up with payments”.
It advises against using cash and cheques more than once a week and instead recommends using a debit card to “help lenders understand your spending”.
So while it is true that both credit and affordability scores are impacted by withdrawing cash, the two scores relate to different scenarios, and the post’s caption and screenshot are referring to separate—albeit similar—things.
The ClearScore spokesperson confirmed: “Credit scores are negatively affected by withdrawing cash on a credit card. Affordability scores are likely to be negatively affected by a high volume of cash withdrawals on a debit card.”
Posts like this can spread quickly online and affect a person’s understanding of how certain things work. It is important to check whether information is clear and accurate before sharing it online.
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Image courtesy of Alex McGregor |
This article is part of our work fact checking potentially false pictures, videos and stories on Facebook. You can read more about this—and find out how to report Facebook content—here. For the purposes of that scheme, we’ve rated this claim as missing context because credit scores are only impacted when cash is withdrawn on a credit card.
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