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How is your Credit Score?

Do you know your credit score? It’s an important part of financial security, because it gives you access to better terms for loans or credit.

What is a Credit Score?

It is simply a rating based on personal and financial information, including past loans, their conduct, repayment on time, recent credit applications and some personal information. Your activity for an evaluated period is rated using a scoring range, and a score is generated each time a request for credit is made. There are three main reporting bodies: Experian, Illion and Equifax. There are also others and each uses a different scoring system.

The factors common to all are:

  • Negative information - Defaults, judgements, bankruptcy, company liquidations

  • Repayment history - How the loan was conducted, card repayments made or paid bills or accounts

  • Personal - Age, employment history, address

  • Credit Enquiries and Applications - Enquiries are recorded and if you frequently apply for accounts this can be a concern for the reporting agency

What is a Good Score?

Each agency uses different score bands and has different methods of calculation of the score. An Experian score above 700 is considered ‘very good’, Equifax for that rating is above 726.

As a general guide the higher the score the more this indicates reliability. Lenders generally look for 620 or above , from the top three categories; average, very good, excellent.

Check Your Credit Score

Research agency Canstar has a connection to Equifax which is free and secure. Go to:

Benefits of a Good Score

A good score improves your financial advantage:

  • Increased borrowing capacity

  • Better negotiating power, for example a better interest rate

  • High approval rates

How to Improve a Score

  • Pay bills before the due date to ensure a consistent record of payments (no late payments)

  • Minimise the number of Applications, don’t make multiple applications over a short space of time

  • If there is a Default, pay it off. It stays on the file for five years but clearing it shows responsibility. Two or more unpaid debts can have a big impact on the credit score, as does not paying on time

  • Maintain a Budget, business and personal, and live within it

  • Older borrowers tend to have better scores than younger ones.

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