Rob Stock: What's your credit score?

Your credit score may be lower than you expect.
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Your credit score may be lower than you expect.

OPINION: Checking your credit score these days costs nothing, which is the way it should be.

None of us ask to have a credit score, which is between zero and 1000.

Credit agencies like Dun and Bradstreet compile credit files about each of us whether we like it or not, so it seems fair we should get instant free access to them.

Credit Simple started letting people do that earlier this year. For the first time hundreds of thousands of people checked their credit scores.

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I did. Just for fun. It was fine, but I was surprised it wasn't higher.

It rather dented my confidence in the credit scoring industry. It seems that if you haven't had debt for a while, you fall outside statistical norms.

Getting it right matters, as people with higher credit scores should pay less for loans.

We are starting to see "risk-based pricing" emerging in the market.

Boss of Credit Simple David Scognamiglio outlined to me the kind of interest rates people should be getting depending on their credit score.

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400 or less: Chances are you haven't paid some bills and there's a default on your file. You might have a court judgment, summons or bankruptcy. Few lenders will offer you a credit card, but you may be able to get a personal loan with a"non-traditional" credit provider such as a peer-to-peer lender or payday lender. You may need a family member to guarantee the loan. You're likely to pay 22-24 per cent. To boost your score, try switching to pre-paid phone and electricity services, and save for purchases where you can. Make sure you make all payments (loans and power) on time and gradually your score will improve.

401–500: Loans are available, provided you meet income requirements. You just might not be able to drive the hardest bargain. Expect an interest rate closer to 17 per cent on a secured personal loan and around 2 per cent higher on an unsecured loan, or you are paying too much. You probably won't get a credit card. Once you've been paying off credit on time for a year or so, consider knocking on your banks door and asking for a better deal.

501–700: Most people hover in this score band. They are generally good at paying their bills, and are a bit older and a bit more financially responsible. They are likely to have a mortgage. They should pay no more for a secured loan from 13.9 per cent or an unsecured loan from 15.9 per cent. They should get a good deal on their mortgage.

701–1000: You're in a good position to negotiate on rate. Your low-rate credit card interest rate should start with 12. Personal loan rates should be around of 13 per cent. Your mortgage interest rate should start with a four. Some of the smaller lenders may offer you personal loans with rates as low as 7.9 per cent, however generally 8.9 per cent is a very good low rate for a secured personal loan.

GOLDEN RULES

  • Nurture your credit score
  • Negotiate for low loan rates
  • Avoid consumer debt

 - Stuff

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