Why is it important to know your credit core?
Zahid Hatiz
Coffee Connoisseur & Baklava Enthusiast at Cinnabar Investment Management ??? Ask me about our funds, and I’ll talk your ear off! Ask me about our Partner Framework, and I’ll buy you cake! ??
As with most things in life, the more information that you have when making life decisions the better. Knowing what your credit score is when applying for credit helps you determine if you are getting a good deal or not.
Why does it matter?
Most credit granting institutions look at the above matrix to asses the risk of you defaulting on your commitment. Analysts or bots then determine the cost of lending you money, based on the risk the bank is taking on you defaulting on your payments. The higher the score, the less likely you are to default, the more favorable the rate you are charged for your loan /bond etc. The lower the score, the less likely you are to qualify for credit at all.
What affects your credit score?
The way you handle your current commitments to lenders is a major contributor. If you are skipping payments, paying your accounts after the due date , or not meeting the minimum amounts due this reduces your score. Also, factors like the number of credit applications done in a short space of time , tells a story of a person living beyond their means.
What to do to stay on top of this?
You can obtain your credit report from the various credit bureaus at any point for a nominal fee, and you are allowed to get a report once a year for free. Once you have your report, you can view things like your payment profile, who has done checks on you and if there is any information that is incorrect. The onus is on you to make sure that the records held by the bureaus are correct.
Ensure your payments are done on time, and the minimum due amounts are paid. If you change jobs for example and your salary dates change, don't just assume that paying a credit card on the 1st when your normal payment date was the 25th is acceptable. Rather contact the institution that issued the card and have the payment date moved.
Ensure that you have a well drafted budget and that you know what you are spending your money on monthly. Set goals to pay of high interest bearing loans off first.