Basically, a credit score is like a mark at school. It tells banks and financial service providers how good you are and have been at paying back debt. And it helps them decide whether they should give you more.

A low score means you are a HIGH credit risk. A high score means you are a LOW credit risk. So you want a high score.

Are you a good or a bad student?
With a good credit score, you can get more credit more easily, and you can also qualify for higher credit limits and larger loans with better interest rates. A bad credit score means you’ll find it harder to get any more loans, and has a major impact on your interest rate and the amount you need to repay every month.

How to keep yourself in creditors’ good books
To keep yourself in the good books with credit providers, always pay on time. It shows that you are responsible and reliable. Late payments and failed debit orders show poor budget management and unreliability, which will push your credit risk up and (your credit score down).

Also, try to keep your credit repayment(s) to less than 30% of your monthly income. This way, you’re less likely to get into debt you can’t repay and worsen your credit record.
If you are having a hard time paying off your loans or cards, speak to your credit provider about alternative payment arrangements. It’s better to get in touch with them and seek out other solutions than to default on your payments, which will put you in their bad books.

Why would you want to know your credit score?
You are entitled to one free credit report per year. The reports include information about your credit history, as well as factors that contribute towards your credit score.

If you know what your credit score is (and if it’s a good one), you may be able to use it to negotiate a better interest rate when taking out a loan. The difference between 13% interest and 10% interest over 72 months is a lot. And you’ll feel better knowing you’re getting the interest rate you deserve.


Photo by: srose15 via Flickr. CC by 2.o

Taryn Bain

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Taryn works with 22seven, has a slight obsession with food, astronomy, history and half finishing at least a dozen books at a time.
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