Your Credit Score Through Ups and Downs

Credit scores are range of numbers that determines the credit worthiness of a person. Higher credit score means higher approval rate from lenders. There are many factors affecting your credit score: how many accounts you open, how much debt you owe, your payment history, and the types of credit you have.

Why has my credit score gone down?

A question I get asked all the time. It’s not an easy question to answer.

Credit reports are organized by consumer credit reporting agencies. Currently, the major players in this industry are the big three: TransUnion (formerly CallCredit), Equifax, and Experian.

For every credit reporting agencies, a good credit score can be determined by:

• TransUnion – a score of 673 or above.
• Equifax – a score over 420 out of 700
• Experian – a score over 880 out of 999.

Is there a specific or standard score that lenders follow to either approve an application or not? No. Every lender has their own system in place on approving applications. So even if a person’s credit score is low, their application could still be approved by one lender, and be denied by another.

But of course, everyone would like to get the most out of a credit. So, here’s a simple guide from Experian how your scores increase or decrease:

Utilizing your credit

Credit utilization is how you balance your outstanding credit from your credit limit. How would you compute your credit utilization? Simple, divide your credit card to your balance credit limit, then multiply it by 100.

Note: Utilize your credit on all your cards. So if you have a large balance and high utilization for one card, your should balance it out with your other card by lowering it utilization.

The Bigger Loss

Those were some basic tips on increasing or decreasing your credit scores, but let’s talk about the more serious and high-impacting factors to your credit score: late or missed payments, defaulting, and County Court Judgment (CCJs).

-80 points

for a missed payment or debt. Sometimes, it’s regardless of how small that balance is, but when it passes the billing date, it could have a great impact to your credit score.

-350 points

worst case scenario, you’re unable to pay and you’d have to default

-250 points

you’ll lose for CCJ

What are CCJs? County Court judgments (CCJs) are legal decisions handed down by the County Court. Lenders can apply for a CCJ if they feel that you’re unable to repay your debt. Ignoring CCJs may lead to more serious consequences such as the foreclosure of your property.

In addition, if you’ve defaulted for more than 2 years, your credit score will decrease by 250, and by 4 years, it decreases again by 200.

One Small Step for Your Balance, A Giant Leap for Your Score

Now to the lighter side of things. Here are some small steps on improving your credit score:

+50 points

if you’ve not applied for any credit for 6 months

+20 points

keeping your card for 5 years

+50 points

registering as a voter is a plus

Also, we’d like to bust some myths on the reasons why your credit scores decrease:

• Paying on your debt that has defaulted does not lower your your credit score, we learn to move on *wink*
• Your address doesn’t affect your credit score even though someone you live with or has lived in your house has a bad credit.

And lastly, never hesitate to check on your credit score. This won’t do any damage to your score.