Credit Score – What does it mean?

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A credit score is not the same as a credit rating or history. All three factors have to be considered by lenders assessing an individual’s loan application and suitability for a loan.

Credit companies require information from potential borrowers to determine a credit score and rating.  The credit score is used by lenders when deciding about lending money for long or short term loans.  From the information provided, criteria are matched and the credit score is determined.

The credit score is an indicator of an individual’s worthiness to qualify for credit.  Lenders use credit scores to apply credit limits and interest rates, whether for a long or short term loan.  Individuals may take steps to improve their credit score, such as being listed on the electoral role for voting, at a current address.

Long and short term lending potential and terms are based on an individual’s credit history.  Part of the information entered within credit applications counts towards their credit history.  Other factors contributing to credit history and affecting an individual’s credit score are: how past financial obligations were managed; how present financial responsibilities are met; and whether there are defaults on loan payments.

Credit reference agencies provide individuals with credit reports detailing their credit score and rating.  The credit reports provide information used to determine the credit score, and these include both financial and non-financial information.  When individuals would like to improve their credit score and rating, they may use the credit report to gain details about their credit history.