A new guide aims to set consumers straight on common misconceptions surrounding credit reference agencies and how they work.

Credit agency Experian has come up with a basic guide, called 'Credit Report Myths', which dispels some of the wrong information that has been perpetuated over the years.

Jill Stevens, director of consumer affairs at Experian, said: "It is important that everyone understands how credit works so they can have confidence that the system really does work for them."

One popular misconception is that credit reference agencies hold blacklists but in reality lenders run a check using credit reports but no one tells them whether to lend or not.

Some homeowners worry that previous occupants will affect their creditworthiness however lenders only carry out credit checks on people, not addresses, and they also need permission from the individual.

Other myths revealed by the guide include the fact that adverse information can not be removed from your credit report (only incorrect information) and your credit report will not show if you have been refused finance in the past.