Your credit score is a number that can have a huge impact on your adult life. A bad credit score is not a good thing, we’re all taught that much, at least. However, many don’t know how to read their own credit score, or how to build good credit in ways that won’t cause financial issues later on. Getting a credit card is not always the answer to building good credit. Most people also don’t realise that if you run a business, your business has a credit score as well, which works in pretty much the same way as a personal one. But first, let’s tackle what a credit score is, and how it can affect you.

What Is A Credit Score?

Your credit score is a rating that is created from the sum of all of your financial products over the years. As a member of society, you’ve been building up a bit of a financial paper trail since you opened your first bank account. Typically, this happened when you were quite young, but it put you on the radar. This credit rating that you have is a number somewhere in the hundreds (hopefully), which the creditors and lenders of financial companies can use to figure out if you are a trustworthy applicant or not. If you have a good credit score and rating, you are much more likely to be approved for credit (such as credit cards, mortgages, and loans). If you’re a business owner, then your business will have its own credit score, made up of the same basic information. If you’re applying for credit for your business from a supplier or a bank, they may run a credit check on your business to make sure you can afford to pay the debt. If you have a bad credit score or rating, you’re likely looking at an immediate “no” from financial lenders.

What Does My Credit Score Consist Of?

Your credit score is made up of many things. If you have paid for something under a contract or agreement in your name, it affects your credit score – this includes rent payments, loans, phone bills, utility bills, and many others. It is your financial history of payments and late payments, for any lenders to see should they require it. They can’t see individual details, but your credit score is affected when you don’t pay for something or don’t pay for it on time. It’s recommended that you check your credit score and keep at eye on it to make sure that there is no misinformation.

Understanding Your Credit Rating

Your credit rating or credit score is typically a three-digit number that is applied to your financial history. This number, scored out of 800, shows lenders how responsible you are with your money, and what kind of credit history you have. Having no history is just as bad as having a low credit rating; this is definitely something to take into account. In general, a credit score below 600 is bad, above 750 is excellent, and between these numbers is pretty average. If you are refused credit, your credit score is probably bad or low. Every time you apply for credit, you leave a record on your file. If you do this too often in a short time period, you can damage your rating.

To improve your credit rating, you should endeavour to pay your bills on time, build a positive credit history as a borrower who always repays what they owe when asked to, and close your unused accounts.

At Debtcol, we don’t just help our customers ensure their customers pay their debts on time, but that their customers can actually afford to pay them as well. One of the ways we do this is through financial investigations, including running credit scores on your customers. We then present our findings to you in easy to understand terms, and walk you through what that means for your business. If you would like to find out more about credit scoring your customers, just get in touch with the team today.