What is a credit score?
This is how lenders calculate whether they will grant you a loan or credit. A score is a snapshot of your
credit risk profile at a particular point in time. The higher your score, the lower the risk to the lender.
How are they calculated?
Every score is individual and calculated using a mathematical formula that evaluates all types of
information on your credit report, compared to information patterns in millions of past credit files.
The score can then identify your level of future credit risk.
What is the most important factor to consider?
Most credit score and credit rating agencies use five main factors to determine your credit score. Listed in
priority order these are:
‘Payment History’ ‘Amount owed’ ‘Length of credit history’ ‘New credit’ ‘Types of credit in use’
These will vary between credit rating agencies but the essentials will remain the same.
Why do lenders use scores?
Scores provide an extremely reliable and valuable guide to future risk based solely on credit report data.
The higher your score the lower the risk to lenders when extending new credit to a consumer. Debt
Consolidation Loans often require a good credit score, so do not wait until you have missed a number of
payments to ask for help. The reason for this is that banks are far less likely to lend money to repay
other people's debts than they are for a tangible item such as a car or household appliances.
Does everyone have a credit score?
Yes, any one who has had credit will have a credit file. For a score to be calculated on your credit report,
the report must contain at least one account that has been active for six months or longer. This ensures
that there is enough recent information, in your report to compute an accurate score. Your score also
will not be calculated if there is a fraud statement on your credit file or if all trade lines are disputed.
How often does the score change?
Your credit file is continually updated with new information from your creditors and companies you
have applied for credit. |
