What is a Credit Score?
A credit score, sometimes called a credit rating, is a calculated ‘measure of risk.’ Calculated using a number of different factors, your credit score represents the risk factor that a lender will be assuming when providing you with credit for a mortgage, loan, credit card etc. Not only will it affect a lender’s decision on whether or not to offer you credit, but it will also affect the interest rate they you are given and the amount of money you will pay back.
How is Credit Score calculated?
Credit score is calculated using three main values. The calculation first looks at information on your account and profile (your existing credit, outstanding loans, overdrafts), it then checks public records for any black marks on you such as bankruptcies or summons. The third factor is inquiries, both on your part of applying for loans and credits, and of lenders inquiring as to your credit score. Modern credit scores are also now calculated taking into account the credit score of everybody else, to place you in a percentile which can influence your approval and interest rate.
Who does Credit Score matter to?
Credit score matters the most to two linked parties, the lender and the consumer. To lenders, credit scores are a way of defining how risky a potential loan or mortgage is; allowing them to increase the rates or deny service to a risky consumer. Consumers will find that without a good credit score, they will struggle to obtain approval or affordable rates on a number of types of credit.
How is Credit Score negatively affected?
Credit score is calculated on your financial performances over your lifetime. Financial irresponsibility results in a low credit score; ways to negatively affect this include too many inquiries for credit, late or non-repayments, large outstanding loans or overdrafts, a number of high balance credit cards and more.
How is Credit Score positively affected?
Like all types of reputation, credit score is easier to tarnish than to improve. With credit history such as late repayments being held on record for up to 7 years, financial responsibility is a long term activity and will result in a high credit score if maintained permanently. Ways to improve your credit score include timely or early repayments, having a low amount of outstanding debt, and avoiding applying for credit unless absolutely necessary.
Do too many inquiries still negatively affect my Credit Score?
It is often cited that having too many credit inquiries on your credit history can contribute to a low credit score. Whilst this is true in the long run and applying for a credit on a number of occasions over a long period of time can detrimentally affect your score, a number of inquiries in a short space of time when shopping for the best interest rates is often recognized by credit scorers and not taken into consideration as ‘over-inquiring.’
What is considered a good/bad Credit Score?
Credit scores are calculated differently depending upon the agency carrying out the assessment. Across all of the main reporting bodies (Equifax, VantageScore, TransUnion, FICO, Experian), the higher the score; the lower the credit risk. A low credit score will affect the consumer’s chances of being approved for credit and receiving low interest rates. It is impossible to categorize a general ‘good’ or ‘bad’ score as it will depend upon the body calculating the score, however receiving a favorable score from one body will normally mean that your credit score is good across all calculations.
How can I find out my Credit Score?
Your credit score is available to a number of bodies such as banks, credit card companies, lenders, brokerages and more. For the consumer, the easiest way to find out your credit score is to use one of the many websites available online that can offer reports and assessments on your credit history. By inputting your personal and financial details, these websites will check with a number of existing agencies and return a calculated credit score; consumers will sometimes be required to prove their identity. This website analyzes and compares the best online tools for finding out your credit score, based upon a number of factors to help you find the most suitable website for you. Use our price and feature comparison tools to discover the credit score checker that most closely suits your needs.