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Why You Should Know Your Credit Score

Credit • by Creditgenie • 19 October 2017

What is a credit score (credit rating)?

It is a number determined by a credit bureau based on your credit history over a time period. Your credit history constitutes all the information regarding your credit habits, and a credit report is the document logging it.
 
Credit bureaux

There are three major credit bureaux: Transunion, Experian and XDS. Each has its own formula for determining credit scores. Hence you will have a different rating from each.
Credit bureaux credit score ranges
      Range     Poor     Fair     Good     Very Good/Excellent
Transunion     0-1000     0-614     615-729     730-821     822-1000
Experian     0-750     0-549     550-599     600-649     650-750
XDS     0-1000     0-698     699-719     720-759     760-1000

 

Lenders may look at your credit record from one, two or more credit bureaux before deciding whether or not to grant you credit. Some financial institutions compile their own information regarding your credit habits.

 

Every aspect of your credit behaviour is recorded and goes onto your credit record, like when you pay a bill or take out further credit. Creditors upload information to the National Loans Register monthly which then gets passed on to the credit bureaux. Therefore your credit score changes all the time.
Why do you need to know your credit score?

It influences your ability to obtain credit and the best interest rates. You could be denied credit if you score low, and if you do manage to obtain credit, you could be charged high interest rates.

 

Knowing how you score and taking proactive steps to keep it above par could mean the difference between getting your home loan or not. Depending on certain credit providers’ business model, an excellent credit score is 575.
What impacts a credit score?

    The amount and severity of late payments
    The type, term and number of accounts
    Total debt
    Outstanding debts
    How often you apply for new credit (including co-signing for a loan)
    Public records such as administration or judgements, etc.
    Enquiries by lenders

How can you improve how you score?
Dos     Don’ts
Make monthly payments on time     Don’t miss any credit card payments
Pay outstanding balances in full     Don’t end up in court for late or non-payment
Notify creditors immediately if you can’t make a payment     Don’t take out further credit when paying off debt
Keep credit balances low     Don’t max out credit cards
Close accounts you no longer use     Don’t take on too much debt
Pay off debt closest to their credit limit first     Don’t move balances form card to card
Check your credit report for errors     Don’t enquire about credit unnecessarily

 

So now you can see why knowing how you rate is so important. It influences your creditworthiness and impacts on your ability to obtain credit and whether you will pay prime for interest or be taken to the cleaners.

 

Tip

    Don’t use credit repair agencies

FACT

    Having too little debt can count against you as creditors won’t be able to determine your payment habits and therefore not trust you