What is a Credit Rating?
Measures the ability of the borrower to repay money.
A high credit rating → Lower risk of default (Default = unable to make payments)
How is a credit rating expressed?
A range of numbers
300 – 850
A credit score is derived from a person’s credit history.
For businesses and the government
Expressed as letters
CCC – AAA
AAA (great) to C (poor)
Moody’s rating ranges from Aaa to D
Your credit rating can affect everything:
- Approval for a loan
- Interest charged
How your actions affect your credit rating?
Helps your credit rating
- Paying bills on time
- Making monthly payments in full
- Checking credit report & score for accuracy
- Keeping balance below 50% of limit
- Taking out a loan
- Ask for a credit increase
- Asking the collector to update the credit file after payment
- Consolidating all credit card debt under a personal installment loan
Hurts your credit rating
- Missing or late payments
- Not making the minimum monthly payments
- Applying for numerous credit cards
- Exceeding account limits
- Defaulting on a loan
- Closing older credit card accounts
- Having an account sent to collections
- Filing for bankruptcy
What is a good credit score?
- Great (730+)
- Good (680-730)
- Fair (620-679)
- Poor (300-619)