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Chartered Accountants

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Understanding credit scores

Posted on Apr 12, 2017 by editor

Credit scores are an impact factor in determining an individual’s credit worthiness.

When an individual applies for a loan, such as a mortgage or car loan, a credit provider will use a credit score to help them decide whether to lend the money, the amount to lend and the interest rate.

An individual’s credit score is calculated using the individual’s personal details; the type of credit providers used and amount of credit borrowed; any unpaid debts; the number of credit applications made and considers any debt or personal insolvency agreements relating to bankruptcy.

A credit score is rated on a five-point scale:

  1. Excellent: highly unlikely to have any adverse events harming your credit score within the next 12 months

  2. Very good: unlikely to have an adverse event in the next 12 months

  3. Good: less likely to experience an adverse event in the next year

  4. Average: likely to experience an adverse event in the next year

  5. Below average: more likely to have an adverse event in the next year

To prevent a negative credit score, individuals should try to spread applications over a larger amount of time; lower credit card limits; ensure their credit card is paid in full each month; and pay their rent, utilities and other loans on time.

For many years now Garry Hughes of BDS Hughes Chartered Accountancy and his team have provided us with an exceptional professional service. We have found Garry‘s knowledge in his field of taxation, business planning and financial matters of great value to us, along with providing us additional recommendations for improving our business strategies. We would recommend their friendly and professional services to anyone who is looking for an accountancy service that will improve their business performance.
Jane HandleyDirector Rug Doctor

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