Guide to Understanding Your Credit Score

What’s my credit score? It’s a question everyone has asked themselves at one point or another, and like it or not,  those three-to-four-digits will determine how easy it is to acquire a loan, whether it is for a mortgage, car, credit card, or personal loan.

If you don’t know your credit score that’s okay and you aren’t alone. Many people don’t know their score, but the moment someone mentions credit scores, you might start to ask yourself questions, like:

• How is my credit score calculated?
• How can I check my credit score?
• How can I improve my credit score?

Rest assured, in this guide we will help you understand the ins and outs of your credit score, allowing you to be more in control of your financial situation.

What is a Credit Score?

A credit score is a number designed to represent the likelihood you will pay your bills and liabilities on time.

Your credit score can slightly vary depending on which credit reporting body you use. For example, Illion and Experian credit scores report a number between 0 and 1,000, while the Equifax credit score is between 0-1200. You can use either, as both provide accurate information on your score and offer a free report.

As part of our process when assessing your application and finding the best options for you, we’ll provide a free copy of your credit file so you are fully aware with your credit history.

Credit Score Breakdown: What Really Affects It?

Now you understand what a credit score is and the range different credit reporting bodies use, let’s discuss what affects your score. You can’t start trying to improve your credit score if you don’t know what affects it!

Some common items affecting your score are:

• Payment History: Your payment history, including current, previous, and missed payments will significantly affect your credit score.
• New Applications: Most lenders check your credit score when you apply, and multiple applications can lower your score due to repeated enquiries.
• Credit File Issues: Overdue debts that result in defaults can negatively impact your credit score.
• Age of Credit File: A newer credit file typically poses higher risk to lenders than one established over many years, potentially lowering your credit score.

These are just a handful of the factors that can affect your credit score. If you want to know what else can contribute to lowering your score, Equifax provides some helpful information about what impacts your credit score.

How to Improve Your Credit Score:

Now, don’t worry if your credit score isn’t where you want it to be, the great thing is your score isn’t set in stone, there are steps you can take to improve it, such as:

• Checking Your Details: Make sure your details are correct, sometimes credit files can be created with incorrect information such as spelling of name, date of birth, or address.
• Make On-Time Repayments: Consistently make your repayments on time, showing a positive repayment history can improve your score.
• Limit Financial Enquiries: Limiting credit enquiries prevents your score dropping due to multiple lender checks.
• Act on Credit File Issues: Address any adverse on your credit file with establishing payment plans and making timely payments can help improve your score

Need assistance? Give our lending team a call!