There is more to your identity than your name, address and day of birth. Your credit score is something that is entirely personal. It is something that many can access to make an assessment on you. It even includes potential employers who as part of their recruitment process can get your score as one means of assessing your reliability.
Your credit score is a calculation made on your credit history, data up to seven years old. If you appear to have significant debt, missing payments on a regular basis, and have little available credit, your credit score will be low and that will damage your prospects of obtaining additional credit at anything like a competitive interest rate.
Alternatively, if you have always paid your bills on time and have no apparent financial problems, your good credit score will be a boost if you are seeking a mortgage to buy real estate. Given the importance of your personal score, you should make sure you understand the details behind the credit score and how it can rise and fall. Those with a poor credit score need to understand how they can improve it while it is equally important to avoid your existing good score from any damage.
There are three major agencies, TransUnion, Equifax and Experian. They prepare information, and a credit score, from all the information they receive. That information can be accessed by everyone from a prospective employer to an insurance company that wants to know the potential risk it is facing, and of course lenders. It is fairly common that the agencies will produce different scores for the same individual because of the different sources of financial information that exist and the fact that one agency may have different information than the others. The overall credit history is constant but one agency may only receive certain information which differs from what another receives.
What is the Credit Score?
It is a three-digit number calculated on the information to hand. A score over 800 indicates you are a good risk. You must have always paid your bills on time and not have any judgements against you. You are likely to have available credit and as an example if you have a credit card balance, you will be nowhere near your credit limit.
If you are somewhat lower, for example around 750, that may be because you have less available credit, meaning your debt to income ratio is not so impressive. Slightly lower and you may have had an occasional problem but have made efforts to repair any small blemishes. Perhaps your credit card balance is a little high though you have not failed to pay the credit card company on time? You may not get the best competitive rates but there will not be a great deal of difference.
If you are lower, that is an indication of past problems. The result is that lenders will regard you as a slightly higher risk. You need to know how to improve your score but you are above what is regarded as a bad credit score which is certainly not good news for those looking for online personal loans.
A poor credit score, something below 600, identifies you as someone who has regularly missed payments and is likely to have judgements against you. You will be regarded as a poor credit risk and if you are to obtain a loan, you will need to demonstrate that your current income means you can repay the loan in full. There is no doubt that you will face a higher rate of interest and sometimes you will be asked for some form of security as well.
The Bad Score Scenario
Many people found themselves in real financial trouble after losing their jobs as recession struck. Most then found their credit score falling as they failed to meet their financial commitments. Every blemish went into their record and those blemishes last for seven years. In some cases, most of the defaults will have gone but there needs to be positive proof of serious effort to repair their financial situation to actually see the score rise. If this is you and you have yet to address your problems, you will find it difficult to get any loans you require so take action.