Starting from 2021, South Korea has transitioned from a credit rating system to a credit score system. Many people, including college students applying for student loans, entry-level workers seeking credit cards, and newlyweds acquiring loans for rental deposits, are familiar with the term 'credit score'. However, understanding how this score is evaluated, its influencing factors, and the process of checking one's score is not as common knowledge.
Credit score, in financial transactions such as with banks, insurance companies, and credit card companies, holds paramount importance just like trust in human relationships. It is the ability to pay back on time after purchasing goods on credit or borrowing money. Financial institutions use this credit score as fundamental data when deciding to maintain transactions with each customer. The credit score is a numerical indicator statistically analyzed by financial companies, predicting the likelihood of a customer's long-term default within a year.
A credit score is determined on a maximum scale of 1,000 points. As expected, a score close to 1,000 indicates good credit status, while a score near 0 signifies poor credit standing. A low credit score can place restrictions on various loans and credit card issuances.
Three primary factors affect the credit score:
1. Type of credit transactions: Factors such as the types and frequency of credit accounts can influence the score. A larger debt from a loan may increase risk and subsequently decrease the credit score.
2. Repayment history: Whether the loan was repaid on time significantly impacts the score. Regular repayments can improve the score while delinquencies can harm it.
3. Current debt level and duration of credit transactions: The amount of existing debt and the length of time you've had credit can also influence your score. Proper credit card usage and timely repayment are seen as positive signs.
Checking one's credit score is crucial for credit management. Websites like 'AllCredit' and 'NICE JiKimI' offer free credit score checks, allowing users to access their scores three times a year every four months. However, the score might vary across these platforms due to different evaluation standards. Since October 2011, credit inquiries no longer negatively impact credit scores.
Moreover, Toss, in official partnership with the credit evaluation company AllCredit (KCB), provides a free credit score check service. With Toss, users can track their credit information, including card, loan, and default status. They also receive notifications about changes in their credit score, enabling continuous credit management. Users are encouraged to check their credit scores using Toss's unlimited free inquiry service.