Our Basic Guide on Credit Scores: What You Need to KnowDecember 23, 2020
Having a good credit score gives you access to loans and credit cards with favorable terms and higher chances of getting applications approved. It also assures your lenders that you are reliable and can pay back the money you borrowed. Therefore, you are likely to receive a much better deal and save more money in the long run.
On the other hand, having a bad credit score shows you are a high risk to lenders. As a result, you will be charged more for borrowing money.
Your credit score is a vital part of your financial health. To help you learn more about it, use this article as your guide. That way, you can manage your fiscal assets more efficiently and live a comfortable life.
What Kind of Information Is Included in My Credit Score?
Credit bureaus calculate your credit scores and provide your lenders with the results. There are four major credit bureaus responsible for calculating credit scores, and each of them has its own scoring model. They are Compuscan, Experian, TransUnion, and XDS. Regardless of the method being used, all credit scores have the same function.
When you need to check your credit score beforehand to help you get a better deal on a loan application, remember that not all lenders reach out to the same bureau. However, they all use the same information, which includes the following:
- The types of credit you have
- Student loan
- Car loan
- Credit card
- Your payment history
- For how long you have had credit for
- Your credit limits and how much of it is used
What Affects My Credit Score?
You start building your financial history as soon as you actively use your accounts with lenders, retailers, or banks. Your credit history will show your entire payment history, including the amount of money you have borrowed in your lifetime and the amount you have paid back in full and on time.
Your payment history dramatically affects your credit score. In fact, some say that it is the biggest factor when calculating, so prioritize paying on time and more than what you should to improve your credit score.
Another factor that affects your score is your credit limit and the amount of balance you’re using. For instance, using your credit card too much will negatively affect your score. Avoid doing this and use only at least 30 percent of your credit limit to show your lenders that you’re using your credit card responsibly.
How Do I Build My Credit Score?
If you’re wondering how to build a good credit score in South Africa, stay away from debt as much as possible. Consider starting making healthy debts through a credit card, store account, phone contact, and vehicle finance if you don’t have debt but still want to build a good credit score. Doing this will provide the credit bureau with enough data to collect and give you a score.
Saving money, living within your means, and settling your debt right away are some of the best pieces of financial advice you can live by. Aside from those, you should maintain a good credit score since it shows creditors the risks of having you as their customer.
Remember the information on this guide to improve your credit score. Meanwhile, explore available low credit score loans in South Africa if you have a bad credit score and need a loan.
If you need online loan brokers’ assistance, reach out to Hoopla Loans. We can help you have your loan application approved despite having a bad credit score. Get a loan today!