Whether you’re someone who regularly checks your credit score or has no idea what their number is, it’s important to have an understanding of how important your credit score is. The fact is that most people will need to ascertain credit at one point or another in their lives, and so, it’s important to get to grips with how your credit score can impact your ability to be accepted for credit, as well as how your magic number is determined.
To give you a better understanding of what your credit score is used for, how it can impact you, and how your number is worked out, we’ve put together this useful guide.
What is a credit score?
Credit scores are simple – they’re a score out of a set number that determines how likely an individual is to pay back any credit that’s borrowed. Say, for example, you were to check your credit score using the MyCreditMonitor – Credit Report service; you may get a score of 550 out of 700, which is labeled as a ‘good’ score. This means that should you try and ascertain credit; the chances are that you would be successful, as your score shows that you are likely to pay back any credit borrowed. Your credit score number will change depending on which company you check it with, but it should always be around the same amount, as long as it’s marked out of the same number – some companies mark out of 1000 instead of 700, for instance.
What factors determine your number?
Now that you know what your credit score number is, you may be wondering what determines your score. How a credit score is determined is through a range of different factors, one of which is how you’ve managed loan repayments in the past, if you’ve had a loan, that is. Other factors that are taken into account are how much credit you currently have, whether you’ve had any credit applications rejected, or whether you’ve had any serious arrears or bounced direct debits. Factors such as whether you’re on the electoral roll can also impact your credit score.
Why is one number so important?
In terms of how important your credit score is, that depends on whether you plan on applying for credit anytime soon. You see, whenever you apply for credit, from a mobile phone contract or a mortgage, your credit score is taken into account. So if you want to be able to ascertain credit, you need to ensure that you have a ‘healthy’ credit score. Otherwise, your applications for credit could be rejected, leaving you wondering how you will get the funds that you need.
Can you improve your credit score?
The good news is that you can improve your credit score if it’s low. Yes, it takes time, but it is possible to improve your credit score and make your chances of ascertaining credit more likely. So, if your credit score is lower than you would like, there’s no need to panic about it, as it can be changed.
There you have it, a guide to your credit score and how important it really is.