What the Different Credit Scores Mean

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What-the-different-credit-scores-mean

767- 999 Excellent Low Risk High probability of collection

 

681- 766 Good Medium Risk Average probability of collection
614- 680 Favourable Potential High Risk Low probability of collection
583-613 Average High Risk Low probability of collection
527-582 Below Average High Risk Low probability of collection
487-526 Unfavourable High Risk Low probability of collection
0-486 Poor High Risk Low probability of collection

 

The financial activities of credit active consumers are recorded by credit bureaus. This is highly useful for lending institutions that could be assessing potential debtors’ applications for credit.

Credit reports contain substantial data about individuals’ or a business entity’s credit behaviour.

This includes:

  • Skipped payments – anytime an individual or business has made a late payment, it reflects on their report.
  • Too much debt – If an individual or entity has too much debt, their debt utilisation will be included.
  • Court judgements – this remains for more than 10 years and has an adverse effect.
  • Length of credit history- having credit history of more than six years means that a credit record has been established.

Understanding what the different credit scores mean is essential for borrowers and lenders.

These scores are calculated by using the information that is in credit reports and serve as simple indicators of how debt has been managed by the individual or entity.

Scores under the 620 level are regarded as a high risk, so the applicant is likely to skip payments.

The ideal borrower has a score within the 750 + region. This is regarded as an excellent credit score and the applicant represents a low risk. They pay their debts when due, with enough income to afford to make repayments.

A lower credit score may be due to a range of factors, such as skipped payments, balances too close to the credit limit or having a credit history fewer than six years.

Once an individual knows what the different credit scores mean it can become easier to make improvements.

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