With interest rising from their historic lows, some people may be worrying about whether this will impact their credit score.
In itself, the answer will be no, but that does not mean that lenders might become more cautious in their lending activity, which in the case of ‘risk-based pricing’, where the interest rate lenders charge customers is linked to the risk assessment of an individual undertaken by lenders using this model.
Credit scores are calculated using the data compiled in your credit reports by credit bureaus such as Equifax, Experian and TransUnion based upon each person’s status, including residential status and employment, overlaid with their history of borrowing and repaying debts. The most crucial factors in improving credit score include;
- Paying debts as agreed on time each month
- Credit usage – utilising responsibly
- Credit history – ‘long and clean’ represents a positive
- Credit mix – managing multiple credit sources successfully
While in itself inflation should not affect an individual’s credit score, if the factors listed are impacted by rising costs, then sadly a person’s credit profile could be negatively affected.