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What is your credit score, and should you care?

What is a credit score?

A credit score is a report that reflects your history of financial responsibility and stability in terms of how you manage credit over time. It is a very useful tool for lenders to determine or predict whether the consumer qualifies for a loan and if they will be able to service the loan. A credit score is calculated based on the information in your credit report. There are different types of scoring systems that may vary from bureau to bureau.

What is the purpose of upholding a good credit score?

Usually, when a credit decision is made for opening up any store account, a credit card account, asset financing purchases, or home loan applications, solid facts are obtained to motivate and approve the request.

The credit provider needs to establish whether they will be able to get the money back from the consumer. Factors such terms, limits, financial position, credit score, and risk are weighed up to make an informed decision on whether to extend credit.

Who has access to your credit scores?

Any commercial banks, financial and credit lending institutions, landlords, insurance companies, car dealerships. This information may be the determining factor to whether you will be able to purchase a car or even rent a home or apartment for your family.

It is a fact that it is easier to obtain a score if you have accounts or credit cards. Without it; it is even more difficult to obtain more credit.

Who collects credit scoring information on consumers?

A summary of your credit history is kept by the major credit bureaus, including:

  • TransUnion

  • Experian

  • Inoxico

  • Debtsource

Credit bureaus have to ensure that the information collected about consumers is accurate in terms of the Fair Credit Reporting Act (FCRA). It is still important to check your credit report regularly, as inaccurate information could hold negative consequences.

What is the Basic information held on a credit score, and how is it looked at?:

Comprehensive payment history; including information such as debt-to-credit ratio, any new credit, history and the sum of credit, and the overall score of servicing current debt and taking on new debt. Record is even kept of details entailing where and how long you have been residing at a specific residence.

The question is whether you as a consumer can be trusted to repay your loans and bills.

Have you been paying on time and regularly within given terms?

If not, your account may have been flagged for collections, and you may become rated as a slow payer.

Are there any defaults, listings, liquidations, debt counseling, sequestrations, or other orders listed against you in your personal and/or legal capacity?

Credit available to you will be determined in relation to your total debts, the percentage you use in terms of the available credit.

  • The number of enquiries done at other companies for loans and the dates thereof may indicate cash flow problems. How many different types of credit do you have in your name?

How do I get my credit report?

Each consumer has the right to an annual free copy of a credit report from the major credit bureaus.

What can I do when my information is inaccurately kept at a bureau? Consumers can send a written letter to the bureau informing them of any disputes in terms of inaccuracies, and attach the supporting documents. An investigation will then be conducted. Should the finding be that the information is not correct, the bureau must inform the other bureaus. A letter must also be sent to the company that supplied the inaccurate information to the bureau.

The information held on your credit score may hugely impact your ability to obtain a loan, a home, or a car and it is therefore of great importance that you make sure that the information is correct, and that you always maintain a good credit score.

Source: Claudine Klingenberg, Key Accounts Manager : Credit at TWK Agri (Pty) Ltd.

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