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Credit Score 101: Understanding Your Credit Score

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27 APRIL 2023

We’ve all got one, or eventually will have one, but what is a credit score and what influences it? In short, it’s a numeric evaluation of your credit worthiness, calculated based on your financial history  - the higher the score, the better. But let’s dig a little deeper and shed some light on the world that is, credit scores. 

Who calculates my credit score?
While your credit score is your personal score, it can differ depending on the agency that calculates it. Here in NZ, we have three main companies  - Illion, Equifax and the provider we use, Centrix  - who generate credit scores. This calculation is used by lenders like us, to determine how likely you are to repay a loan.

What purchases or services impact my credit score?
It might surprise you to know how many transactions are reflected in your credit score. Common transactions like credit cards, overdrafts, bank loans and mortgages are some of the more traditional ones. However, it’s also influenced by contracted repayments you might have for things like, phone, internet, or power bills, as well as payment plans like Laybuy, Zip and of course, personal loans. To put it simply, if you used a service and are making regular repayments, it’ll be in your credit report.

But its not only making that purchase or taking out that personal loan that’ll impact your credit score  - multiple credit applications are reflected also. For example, if you’re exploring personal loan options and are applying with multiple providers, each application that you submit will be treated as an individual application, which may gradually decrease your credit score.

Why does my credit score matter?
It’s important to understand the significance of your credit score because it plays an essential role in your financial well-being. A higher score can not only increase your chances of being approved for borrowing, but it can also open the doors to both lower interest rates and larger loan amounts.

How can I repair a poor credit score?
Although there is no one overnight fix, the good news is that you can take steps to improve your credit score. Paying bills on time, maintaining lower credit card balances, or even by applying for a bad credit loan, you can begin to repair your credit. For more detailed tips on what you can do to achieve this, check out our Blog on how to improve your credit score.

We understand life can get ahead of us sometimes and when the bills pile up, credit scores can take the hit. But don’t let those bills weigh you down. Our friendly teams are well versed in all things credit so if you’ve got questions or want to know more about how we can help, contact us today.

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