Facts you Need to Know About Credit Scores
There are only 2 percent of people aged 30 years or younger that has a credit score regarded as “excellent”. This is because people only knew about credit scores is that they needed one. They couldn’t tell why they needed one, how to get one or even what it was. There are quite a lot of confusion about credit scores even from some of the UK’s top financial advisors and consultants. So here are some facts everyone should know about credit scores
What is a credit score?
A credit score is a figure used to represent the probability of you repaying money you have borrowed. It is about trying to predict or figuring out if you are someone that is financially trustworthy. In short, this means of you are good at paying your commitments like your credit card dues and loans. This means your credit score should be higher than someone who usually misses payments on their various loans.
What is the use of credit scores?
It serves as an indication of risks and behavior. Credit scores are more for lenders than for borrowers. Credit scores are meant to help with decisions like if you should have a lower or higher interest rates when you are borrowing. They are also used on insurances and phone companies offering mobile contracts. The higher your credit score is, the more chances you are to be given better deals because you are regarded as a trusted borrower. It is also important to remember that it is not only your credit score that determines your ability to get credits. Lenders will also look at what can you afford to borrow based on your income and other commitments.
How is credit score calculated?
People that has just availed credit scores always start at the middle. Scores that are at the midpoint indicates that you have the potential to be both a good and bad borrower. It is then up to the owner of the credit score to prove that he/she can be a reliable person who can manage money. In the UK, there is no universal credit scores. The credit scores are usually calculated by Equifax, Experian and Callcredit. This also means that you have different credit scores from each distinct calculator. These agencies calculate your score from data they get from your banks, phone company, etc. They then sell that information to companies and banks that require credits scores to let them decide if they want to lend to you.