A credit score signifies your trustworthiness as a borrower, based on your credit history. Your credit score is based on your credit history and debt - using details from your credit file.
Each credit reporting bureau has its own method for assigning credit scores. For example, Equifax, a popular consumer credit reporting agency in the United States that acquired VEDA in Australia, assigns a score between 0 and 1200. This is known as the Equifax Score and is calculated after considering your credit history and related details.
Banks and creditors use your credit score when deciding whether to lend you money or approve your loan application. A good credit score establishes your reliability as a borrower.
Your credit file is a synopsis of your credit history, including:
A credit score is a numerical digit that helps you understand where you stand as a borrower, while a credit file is the overall summary of your credit history. Being a numerical representation of your borrowing capacity, your credit score is used by banks and lenders throughout the country to get a snapshot of your financial status. Credit scores can also provide reassurance to borrowers before they approach a lender for a new loan or credit card.
Your credit score can be accessed by lenders, banks and utility companies. A decent credit score indicates that you are likely to pay back your loans, credit cards and bills. One should strive to maintain a good credit score to be considered a good risk to a lender.
Different credit bureaus calculate your score by assigning unique weights to various factors.
For example, your Equifax Score is calculated using the following factors:
According to Equifax Credit Score System, your credit score can be between 0 and 1200 depending on multiple factors, outlined in the following credit score bands and ranges:
Your credit score cannot be improved overnight – you need to work diligently toward improving it. Here are a few ideas to help you maintain or achieve a healthy credit score: