If you’ve ever obtained a mortgage or car loan, it’s likely your credit history and personal credit score have been checked in order for you to receive that loan.
Understanding your credit score and taking steps to improve it can help you maintain a healthy financial outlook.
The importance of credit
In the simplest terms, credit is money you borrow and promise to pay back, typically with interest. Types of credit include revolving credit, such as credit cards; automobile and personal loans; and home purchase, refinance and equity loans. Having access to credit is important, as it can be useful in times of emergencies, is sometimes more convenient than cash, and allows you to make large purchases. Responsibly using credit can help you to establish a strong credit score. However, misusing credit can potentially cause financial problems.
What is a personal credit report
Your personal credit report is a summary of information on file with a credit bureau, a company that collects data about how people handle credit.
The three major credit bureaus in the Caribbean are EveryData and Credit Bureau.
Your personal credit report contains information about your financial background, including, but not limited to:
- The total number of credit accounts you have open, including mortgages, credit cards, automobile loans and other accounts
- The amount you owe on each account and the monthly payments you must make on each
- Your repayment history
- Delinquent accounts
- Derogatory accounts
- Accounts that have been closed
The report will show inquiries – when an organization such as a bank or retail store requests a copy of your report. It will also show public records – such as judgments, state or federal tax liens, and bankruptcies – and the total amount of money involved.
How credit score is determined
Your personal credit score is generated by a mathematical formula using information in your credit report. Credit scoring helps predict whether a borrower will repay their loan on time and is offered in the Caribbean by external agencies such as EveryData and Credit Bureau in Barbados and across the Eastern Caribbean.
Higher scores are better than lower scores.
When a credit bureau calculates your score, they do not take race, religion, age, sex or marital status into account.
Neither does your income, occupation or employment history figure into the score, nor if you’ve been turned down for credit.
Check your credit report
Review your credit report for accuracy, and immediately report any errors to the credit bureau or directly to your financial institution. The three major bureaus are required by law to provide a free personal credit report once a year at your request. They will also provide it for free under certain circumstances, such as if you were recently denied for credit, or if you suspect someone has been fraudulently using your account.
Stay on top of your credit score