Understanding Your Credit Score

Each of us has a credit score. A credit score is a way in which the bank rates individuals as potential borrowers of money. Your credit score reflects on your history with regards to being able to pay back money borrowed.

To help determine this score, the credit rating industry takes into account the number of outstanding accounts you have such as credit cards, student loans, car loans and possibly home loans. They also look at the length of your credit history and how responsible you were in paying your loans on time and in full.

Another key aspect is your income to debt ratio. This means that as the banks look ahead into the future, can you continue to pay off your current debts if they lend you money and you take on more debt.

What is a Good Credit Score?

You can check your credit score with companies online companies. Checking your credit score does not hurt or help your rating and you should see what your credit score is before applying for any loans.

An informed consumer is a responsible consumer.

What Can a Good Credit Score Do For Me?

The better your credit rating, the more likely it is that you will be able to get a line of credit from the bank. For example, if you are shown to have a good credit score, it is much more likely that you will be able to receive a home or a car loan.

One of the perks of good credit is the ability to get a loan at lower interest rates. If you know your credit score ahead of time, it won’t come as a surprise if your interest rates are higher or lower than the advertised rate.

The key to keeping your credit rating high is to have as few lines of credit as possible. This means cut up all those credit cards that you don’t need like store cards and gas cards.

Be responsible for paying off the minimum on your loans and credit cards each month and, when possible, pay off the principal as well. All these actions will help boost your credit rating and make it much easier to apply for and receive a loan at a lower interest rate in the future.

Understanding how to maintain a healthy financial status is so important. Do you want to buy a new car? Or maybe purchase a home?

In order to receive a loan, lenders want to see your financial history or credit score! Two important components for maintaining financial order include having a healthy credit score, as well as knowing how to budget accordingly.

On Healthy Credit

With a good credit score, you will look more desirable to potential lenders. You will have a better chance of obtaining a loan, and essentially have an easier time buying that new car or home.
So, what factors should you focus on to maintain a great credit score?

On Time Payments

This is a simple component for having good credit. Pay all of your bills on time. Pay your mortgage, car payments, and any credit card payments you may have on time. Having late, or missed, payments will hurt your credit.

If you can’t pay your existing bills on time, a lender may question your ability to make payments on a loan.

Number of ‘Credit’ Accounts

Auto loans, mortgages, and credit cards are examples of different types of credit lines (or accounts). Having a variety of different accounts and keeping them in a good state will show lenders you have experience with responsibly managing various accounts.

Credit Card Utilization Rate

How much of a balance do you carry on your credit cards? Let’s say you have four different credit cards with a combined credit availability of 510,000 and you currently have a combined balance of S6,000.

This means you have a utilization rate of 60%. A lender wants to see that you can responsibly use your credit cards, but not that you rely on them. A healthy utilization rate should stay at, or under, 50%.

Although there are a variety of components that make up a good credit score, these are three factors you should focus on perfecting. Always pay your bills on time, manage a variety of unique accounts responsibly, and be cautious of your credit card usage.

On Budgeting

To budget accordingly, you need to recognize your income and your expenses. For personal budgeting, consider your income and your expenses on a monthly basis.


If you have a salary or hourly job, it should be easy to identify your monthly income. However, if you work for tips or commission, it is wise to “lowball” your earnings.

You would rather have extra funds then be short at the end of the month, right?


Opposite of income, you will want to ‘highball’ your expenses for each month to ensure you have an understanding of how much money you NEED each month to pay all of your bills.

Monthly expenses may include: mortgage or rent, utility expenses, car payment and insurance, groceries, gas expense, and you might consider adding a miscellaneous category as well.

Deduct your monthly expenses from your monthly income, to see how much money you will have remaining. It is always a great idea to review your budget before making larger purchases or any major financial decisions.

For additional guidance, please do not hesitate to contact us with your questions.

Your Credit Score Matters

Your credit score is of utmost importance as you navigate the world of finances and believe it or not, even if you make enough money to cover your expenses, your financial security could be in jeopardy if you don’t actively work towards earning a good credit score.

Your credit score is determined by many things but the mainly objective of it is to prove your creditworthiness to companies before they extend you a line of credit in order to ensure you will pay off your debt to them.

If your credit score is lower than you would like it to be, contact us for tips on how to improve your credit score and drastically increase your credit approval odds.