When you request your credit report from a credit-reporting agency, you’ll want to see if your score has either improved or declined.
Several elements determine in which direction your credit score will move, as well as how low or high the scores become.
It’s also important to note that the parameters for determining your creditworthiness may vary from one credit reporting agency to the other.
So, what factors impact your credit scores? We’ve explored some of the factors in this article to keep you in the know.
By defaulting on your credit repayments repeatedly, your lender will list you as a defaulter, and this will negatively impact on your credit score, lowering it significantly.
On the other hand, making credit repayments on time means that you are adhering to the terms of the loan. Therefore, your lender will list you as a compliant borrower and your credit score will be revised upwards.
If you had been faithfully making your credit repayments to your lender until hard times strike, communicate with your lender about your situation in time, and make arrangements to be placed under a financial hardship program. This program allows you to lower your monthly repayments or even delay them without facing penalties that can be reported to credit reporting agencies.
Serious Credit Infringement Listings Or Clearouts
Such listings can have a severe negative impact on your credit score.
If you have defaulted on your debt repayments for more than six months, and changed residences without updating your account’s personal information, your lender will view this as not just a default, but a serious credit infringement.
When your lender makes repeated futile attempts to reach you through all means indicated on your account’s personal information, the immediate step when they can’t contact you is to list you as a credit defaulter. This negative listing stays on your credit report for seven years and affects financial institutions’ decisions about your credit for that time.
Court Judgement Listings On Your Consumer Credit Report
A court judgment against you means that you are a high-risk debtor. The listing remains on your credit report for five years, regardless of whether you fulfilled the court orders.
Usually taken as an action of last resort, a lender will go to court to obtain a court ruling that obligates you to clear your debt should you not respond to earlier collection attempts.
These Judgements communicate that despite all efforts taken by the lender to compel you to pay your debt, you did not heed to their calls, and neither did you and the lender arrive at a satisfactory agreement.
Errors On Your Credit Report
Mistakes on your credit report may lead to you being awarded lower points on your credit score than you deserve.
If you notice any errors on your credit report, contact your credit reporting agency as soon as possible to have them correct the mistake. Your credit reporting agency will correct the errors on your credit report and add to your credit score points that you were denied due to the error.
We highly recommend that you handle the process of repairing your credit report personally and not delegate to credit repair companies. It is not a cumbersome process, and besides, you’ll save money and valuable resources by doing the process yourself.
Careless Credit Card Spending
Frequently transacting on your credit card inevitably gives your lender more detailed information on your spending habits, which they can accurately use to assess your creditworthiness both positively and negatively.
Prudent use of your credit card and successful credit repayments improve your credit score. On the other hand, if you cannot manage to repay your credit card debt, your creditworthiness will undoubtedly go down.
How long your credit account has been operating, the credit limit and the balance repayments every month are all factors lenders consider when deciding your creditworthiness.
Request for credit reports from credit reporting agencies frequently to know how you’re scoring and to spot and correct any errors on your file.
If you haven’t registered with a credit reporting agency, this OAIC guide should help you to determine which companies are providing this service suit you best.
Because getting access to credit, especially during financial emergencies, is vital, a good credit score can be a lifesaver.
If you can, avoid careless financial actions that could negatively impact your credit report, and practice positive financial habits that will improve your score.