Sandy, who works at a beauty parlour, is one of the many who’ve been severely impacted by the pandemic. Seeing no light at the end of the tunnel, she decided to take out a bank loan.
With a bad record of maxing out her credit cards and not being able to pay them off, Sandy knew her credit history wasn’t stellar. But she’s turned over a new leaf, so the bank might approve her loan now, right?
Not. A. Chance. She got rejected.
Curious about just really how bad her credit score is, Sandy takes the bank’s rejection letter to TransUnion for her credit report. Sandy takes a single look at her credit report, and her heart sinks. In just a few short years, her credit rating has plummeted from E to G.
As it turns out, although Sandy didn’t max out her credit cards in the last few years, those dark days of maxing out credit cards will stay on her credit report for up to five years. Debts that she finally managed to pay off will also show up on her credit history. And to make matters worse for Sandy, the flurry of loan applications that she’s sent to different banks these few years apparently affected her credit score too.
Sandy was flustered. “Those were just applications – I didn’t actually borrow any money. How could this possibly affect my credit score?”
So, what exactly is a credit score? Your credit score is calculated by distilling data on how you manage your credit. If you have any credit accounts, such as credit cards, loans or applications, TransUnion will calculate your credit score based on a handful of factors such as your payment history, the amount you owe lenders, the length of your credit history, and the types of credit accounts you maintain.
Your credit score can fall into any of the 10 ratings between A to J, with A being the healthiest. Frankly speaking, Sandy’s credit rating of G is least desired by lenders. People with credit ratings of I or J are likely on the brink of bankruptcy or might have already gone bankrupt.
Now, you must be wondering about those loan applications. How did these affect Sandy’s credit rating, even though they’re just applications?
When you apply for credit cards, loans or mortgages, banks or financial institutions will get your consent to request your credit report from TransUnion. All of those applications are actually being recorded on your credit report. A sudden influx of application records might be interpreted by the lender as low on cash flow or spending more than you earn, leading to a rejected application or even lowered credit rating.
Your credit rating can easily fall from A to E or F. All it takes is for you to be late in payment for 60 or more, and your credit rating may instantly drop from A to E. But it’ll take much longer for you to pull yourself back up from E or F. Learn from Sandy’s story and keep a close eye on your credit behaviour.
Established in 1981, TransUnion Hong Kong formed Hong Kong’s very first credit database, built from historical credit data, the TU scores are drawn from richer and more predictive data than any other risk scores in the market, offering both individual and institutional users an expansive view of themselves or their consumers. For over 40 years, TransUnion has maintained credit histories for millions of consumers and businesses in more than 30 countries.
Your credit score ranges between A and J—where A is the highest score
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Wait, what about my credit? I want my TransUnion Credit Report