A credit score is determined by a number of different factors. These factors contribute towards giving you a number highlighting the level of risk you are considered to be to a borrower.
Your credit score is affected by an individual’s borrowing history. It takes into account the following points:
- How reliable you have been at making repayments in the past
- The number of hard credit enquiries that are on your file: each time you apply for finance, you receive a hard credit enquiry which alerts future lenders that you have previously applied for finance.
- Defaults, black marks and court judgments: if you consistently make late repayments or fail to make repayments at all then these more severe negative credit listings can be placed on your account. Each of which can remain on your file for many years, dragging your credit score down.
A credit score can be described as a way of determining risk. To a credit provider, a low credit score would represent a high risk, while a high score would be considered low-risk. Credit ratings are used by lenders as a subjective means of judging potential borrowers. However, a person’s credit rating does not always accurately represent the risk of lending credit to them.
The actual formula used to determine a credit score is a tightly kept secret by the credit reporting agencies. What is universally accepted however is that the lower the score, the worse a credit report is considered to be by a potential credit provider.
Fortunately, bad credit can be repaired by a credit repair company, such as Clean Credit. These are one of Australia’s leading credit repair specialists. With a good credit score, you are much more likely to be approved finance and will be able to take advantage of lower interest rates.
