Getting to know your credit score

Getting to know your credit score


Your credit score is an important number in your life as it can affect many financial aspects of your life. The three-digit number is a representation of your credit history, based on an analysis of your credit file, that helps a lender determine your credit worthiness. When an individual applies for a loan, such as a mortgage or car loan, the provider will use a credit score to help them decide whether to lend the money, the amount to lend and the interest rate.

An individual’s credit score is calculated by credit reporting agencies who collect financial and personal information and document it on a credit report. The information is then used to calculate your credit score. Areas agencies assess are;

  • Your personal details; age location, etc.
  • Types of credit providers previously used; bank, utility company, etc.
  • The amount of credit borrowed.
  • The number of credit applications and enquiries made.
  • Any unpaid or overdue loans or credit.
  • Any debt agreements or personal insolvency agreements relating to bankruptcy.

A credit score is rated on a five-point scale with the position of your credit score on the scale helping lenders work out how risky it is for them to lend to you:

  • Excellent: highly unlikely to have any events harming your credit score within the next 12 months.
  • Very good: unlikely to have a negative event in the next 12 months.
  • Good: less likely to experience a negative event in the next year.
  • Average: likely to experience a negative event in the next year.
  • Below average: more likely to have a negative event in the next year.

Credit scores can change over time whether or not you have changed your personal spending habits. Applying for a new loan or credit card, changes to your credit limit on an existing loan or credit account or late repayments are some of the things that can affect your credit score. In turn, your credit score can affect mortgage rates, bill rates and whether or not you are approved for certain utility companies.

To prevent a negative credit score, individuals should try to spread applications over a larger amount of time; lower credit card limits; ensure their credit card is paid in full each month; and pay their rent, utilities and other loans on time.

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If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.


Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.


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