Today, we are going to learn about credit rating scores and how to raise them. Although the credit rating system has been abolished and changed to a credit score system, there are still people who talk about ratings. Also, it is said that financial institutions also refer to credit ratings when checking credit scores.
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There are two things to introduce today. One is a simple credit rating scorecard. The other one is about the credit score system that started this year in 2020.
Credit Rating Scorecard
First, let’s briefly introduce the credit rating scorecard. This is a credit rating scorecard commonly referred to as an all-credit based credit rating scorecard.
▶ All Credit Credit Rating Table
1st grade 942~1000 points
2nd grade 891-941 points
Grade 3 832-890 points
4th grade 768-831 points
5th grade 698-767 points
6th grade 630-697 points
7th grade 530-629 points
8th grade 454-529 points
9th grade 335-453 points
10th grade 0-334 points
Credit rating evaluation tables are similar for most companies, including NICE.
A comparison of the credit rating scorecard between NICE My Credit and KCB All Credit is shown below.
Here’s a quick look at the credit rating scorecard. Next, I will explain the credit score system.
credit score system
Recently, real estate-related policies are pouring in. I raised the comprehensive real estate tax and induced them to sell all but one house. Also, it made it difficult to buy a house with a loan.
At the beginning of this year, it was impossible to take out a mortgage loan for apartments over 1.5 billion won. Regulations were started so that 40% loans up to 900 million won were possible, and only 20% loans were possible for the remaining excess. You need a loan to buy a house, but there are people who feel that getting a loan has become more difficult, so opinions are very divided. Anyway, to buy a house, you usually need a loan. Interest rates vary according to credit rating.
However, this credit rating system will be changed to a credit score system starting this year in 2020. Why did the credit score system change?
Credit score is called the business card of financial transactions. This is because an individual’s credit rating and score affect all financial transactions, such as loans and card issuance at financial institutions. In particular, if your credit rating is below grade 7, commercial banks are restricted from lending or issuing cards.
This kind of credit rating system was originally divided into 1th grade to 10th grade. From 2020, the credit score system will change from 1 point to 1000 points.
▶ Credit Rating
Personal credit rating agencies collect personal credit information, evaluate it, and give ratings
It is a score based on the sum of overdue amount + overdue period + multiple debts + number of overdue repetitions.
Let’s assume that people with grades 1 and 10 borrow 100 million each. The difference in interest between the two is about 23 million won, which is the price of a medium-sized car.
Problems with the credit rating system
For example, on the NICE credit rating, one person has a score of 665 and the other person has a score of 663. It’s only a two point difference, but it’s divided into 6th and 7th grades. Because of the 2-point difference, you cannot issue a credit card and you will pay more interest on the loan.
The credit score system has been introduced because of the fact that there are people who are disadvantaged with a small score difference.
There are several advantages to using a credit score system.
Financial institutions may conduct their own credit risk assessment. If that happens, the ability to manage credit risk will increase in the financial sector. This means that consumers can receive differentiated services tailored to their individual circumstances. And the financial authorities say that using these credit scores, about 2.4 million consumers are expected to see the effect of an interest rate cut of 1% per year.
The credit rating system applied an interest rate discount when the credit rating was above a certain level. When the credit score system becomes more subdivided, the number of people who benefit from it increases.
Not only this, but in 2019, the standards for overdue amount and period were relaxed. First, the short-term overdue payment, which was previously 100,000 won, was increased to 300,000 won. And the overdue history information that remained for three years was shortened to one year. In this way, people such as newcomers to work, full-time housewives, and elderly people who do not have many financial transactions can receive high scores.
Independent credit risk assessment of financial companies
Increased number of beneficiaries of interest rate cuts
Relaxation of overdue amount and period standards
Credit score is good to manage the score in advance, just like the credit rating system.
When a credit rating of 3 is well managed, the average loan interest rate is 2% lower when the credit rating is 2. When you borrow 100 million, you can borrow 2 million won. It is important to manage your credit rating and score well, starting with simple things such as communication fees, city gas, and water bills, which are paid on time and are not overdue.
How to keep my level 1
Below is my credit rating from Kakao Bank. According to the credit rating scorecard, it’s a grade 1.
There is something I do every month to manage my credit rating.
Credit card prepayment
Prevention of delinquencies such as gas and electricity bills
I only take two things every month.
It is 976 points, up 33 points from last year’s 943 points.
I spent about 1.6 million won on my credit card in May alone. All 1.6 million won has been processed in advance. Mainly, we use Citi Clear, which is famous for its lunch card for office workers, and Shinhan Deep Dream Check Card, which gives double points.
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I’m planning to move this year and I hope to see a lot of credit rating benefits. It’s a problem if you don’t use your credit card too much, but it’s a problem if you use too much. I am managing my living expenses on a weekly basis. It’s a small tip, but I hope it helps someone.
Lastly, with the introduction of the credit score system, each benefit is different for each financial company, so there is the hassle of looking at it in detail. Not that many things have changed overall. Even now, there is no major inconvenience in use.
A new credit score system. Find out right now and live a wise financial life.
thank you