All the latest news, facts and tips from the team at Pioneer Credit Connect

Nov 16

Credit Scores 101: How is your score calculated and what makes it useful?

by Matthew Ikin
Credit place blog post image

A credit score identifies the creditworthiness of a person in a numerical figure. Credit Providers use scores, associated credit files and personal application details, among other variables, to determine whether or not certain types of credit products should be offered to customers. Often, the credit score also determines what interest rate will be offered.

It is important to be aware of your credit score so that you know where you stand in terms of your financial health. In addition, as it is a great indicator of whether you will be approved for credit in the future, knowing your score can help avoid disappointment, whilst motivating positive action to improve your score.

Understanding the kinds of spending habits and behaviours that can drive your score up or down could help you make more considered decisions around spending and applying for credit.

The concept is simple: a better score can mean more options, and in some cases, better interest rates.

An excellent credit score could mean more bargaining power when it comes to interest rates and the other terms of your contract. However, lenders may not make these savings known initially, so knowing your credit score could empower you during the conversation to ensure the best offer is presented.

Checking your credit score on a regular basis (monthly is great; twice yearly is good) is a great way to keep track of any unexpected changes. It is important to bear in mind that larger lenders have ways of calculating their own scores, meaning that not one size fits all.

How credit scores are calculated

A credit score is calculated from information on your credit file. Every piece of information on your credit file has a numeric marker; some are positive and some are negative. Having more positive aspects boosts your score and vice versa.

Having checked your score you might be wondering “but my score was better last year!”? There will be aspects of your financial journey that have contributed;

  • ‘Shopping’ around and completing credit applications with lots of lenders in a short period of time can increase the number of credit enquiries markers that subsequently drive your score down. Pioneer tip: know the product you want and do your research thoroughly before completing enquiries.
  • Defaults, credit infringements, court judgements and bankruptcies are seen as high risk and can impact your credit score negatively, say on top of repayments and if you feel that you are unable to meet your commitments speak to the lender about your options as soon as possible.
  • Too many credit cards can lower your credit score as it can also been seen as high risk. Consider other options for repayment management or look to consolidate.

If you have more questions or you would like to find out your credit score please call the friendly team at Pioneer Credit Connect.

Get your free credit score here

A quick credit score assessment can open up your financial horizons, putting you on the road to more options and better offers. Find out your credit score today and apply for credit products with confidence, knowing where you stand.

Disclaimer: Any information provided in this blog is of a general and information nature only. While all reasonable care has been taken by Pioneer Credit Connect in compiling this information Pioneer Credit Connect makes no representations or warranties, whether express or implied, as to the accuracy or suitability of the information contained in this blog.