What is a credit score?

A credit score is a three-digit number that reflects the information found in your credit report. It’s one factor lenders can use to evaluate how much credit to give you and at what interest rate. This number may vary based on the information provided to each bureau.

What affects your credit score?

Your account payment history (whether your bills are paid in full and on time) is the main factor affecting your credit score. Other factors include: credit utilisation (the ratio of credit used to available credit), the length of your credit history, and your mix of credit types. Having too much available credit can negatively impact your score as lenders may feel you have access to more debt than you could pay back. New applications for credit will temporarily affect your score as lenders will likely assume it’s risky to extend credit if several loan applications have been made in a short period of time. Lastly, certain public record information, such as debt review, administration orders, insolvency, or judgments, can lower your score as they show that you have not been able to honour your debts resulting in a legal process to resolve.

Why is it important?

Maintaining good credit habits and a strong credit score can help you qualify for credit with better interest rates. If you are new to borrowing, you may have little or no credit history, which means you might not have a credit score or could be penalised based on the limited information available.