Understanding your credit score
Your credit score is a number that lenders use to help them decide if they should lend money to you. It helps them understand and build a picture of how likely they’ll be paid back on time, and whether you should be given a loan, insurance, credit card, lease on a vehicle, a store card and so on.
Everyone has a personal credit score and this is created from your credit history.
It is essential that you have a decent credit score for your financial well-being and the higher your credit score number is the less of a credit risk you are to a lender. Generally speaking there are two types of credit scores and these are known as generic scores and custom scores.
A generic credit score is used by lots of lenders and businesses to determine the general risk of lending you money. You can access your generic score using the same formula across all three credit reporting agencies.
A custom credit score is developed for the use of individual lenders. These lenders will rely on these reports along with other information such as your account history. The custom credit scores are unique to the specific business and can be applied to specific types of lending such as auto lending, pay day lending or mortgage lending.
It’s important that you know and understand your credit score, and ways you can improve them.
There are some main elements that come from your credit report that can shape what your results would be. These are known as credit score factors and they are as follows;
- Your total amount of debt that you have to your name
- The types of accounts you have under your name
- The number of later payments or missed payments you have
- How long you have had your accounts
These factors will indicate what elements of your credit history have most affected your credit score.
You should ensure these areas are in good standing and look to improve these if you wish to achieve a better credit score.