Credit Scoring
First of all, it’s good to know how credit scoring works.
Financial companies have now agreed to disclose the details of their customers credit terms with one another. This is done via the “credit reference agency” who maintains the files of each individual’s credit activities. This is known to you and I as a credit report. So every time you take out a bank loan, get a new credit card, make monthly instalments, or make a mortgage payment, your credit report is constantly up-dated. This allows a potential lender to make an instant credit check on you, so they can be sure that you have diligently made your payments to previous lenders, and are also currently up to date with your ongoing affairs.
Most of us in the past have probably forgotten, or just been late on a few credit card payments. It all goes down on our history and can sometimes result in us being denied the loan that we so desperately need.
To illustrate in simple terms how the money world goes round, it’s like lending money to two different friends. They both promise to pay you back at the end of the month. One friend pays you back on the day they promised, or even a day early. The other doesn’t. You have to keep chasing them up, calling them for the money you need so much to use for your own needs. Yet the friend keeps on avoiding giving you back your money. To which of these two friends are you likely to lend more money to in the future??? Well that’s how this system of credit history is supposed to work.
So ultimately we are in control of our credit score and repairing the damage we may already have created is key in obtaining a more secure financial future.