A credit score is used to determine your creditworthiness by financial institutions. From lenders to even apartment agents, they all ask about your current score. Take time to find out what your score is. If it’s high, keep doing what you’re doing. For a low score, work on it. There are few lenders who offer loans for poor credit score. You must improve it to an acceptable range. The range for credit scores is from 350 to 850. 350 is the lowest whilst 850 is the highest possible score.
As you review your report, get to know the score range to better understand what a low score or high score is. The report tells you a lot about your borrowing power. The scoring system is used by all financial institutions. Once you understand how this works, you might be in a better position to understand when a lender rejects your loan application. You should know you have a low score and should improve it.
A low score is a burden to carry for it shows poor debt management. Many lenders seek out your credit score first before they decide to lend. Even though there are loans for those with low credit scores, they have such high-interest rates. Also, they come with shorter repayment periods making them expensive. The best course of action is to work on improving your credit scores. With a higher score, you get lower rates and longer repayment periods.
a) Poor Credit Score (350- 580)
In case your current score reads anywhere between 350 and 580, you have poor credit score. As a result, both your credit rating and history are tarnished. You have a limited number of lenders willing to do any business with you. You might have many outstanding debts or charge offs that need rectification. Such a low score can have adverse effects on your life. Some landlords won’t lease or rent to you with it. It is also difficult to qualify for 0% APR cards.
If the poor score was a result of bankruptcy, know it remains in your records for a decade. You have limited chances any lender or credit card company will even look twice at your application. At this point, it’s best to come up with a plan of improve the score as soon as possible. Consult a financial advisor for better tips and solutions.
b) Fair Score (590-670)
A credit score ranging from 590 to 670 is interpreted as fair and open to certain lines of credit or unsecured loans. You can get a loan or credit card with it. Interest charged is lower than that of a poor score. You even have a longer repayment period.
To increase it even further, you can opt to split payments into two per billing cycle. Instead of paying bills at the end of the month, arrange to make payments every two weeks. By doing so, you increase the payment history and increase your score.
c) Good Score (670-740)
Many lenders and card issuers will consider giving you credit with the score. You have a better credit history and rating that they can trust. You can take it even higher with increased payments. Time is the best factor for increasing a credit score. Ensure you don’t delay or skip any payment. A good repayment record is interpreted as creditworthiness.
d) Great Score (740-800)
With this core, you have a handle on your finances and keep a good record of all the accounts. It’s important to know your financial history and report. Such a great score indicates you can be trusted with larger credit card limits and loans. You even have a chance to negotiate lower rates and better repayment periods. Your note issuers and lenders can offer different products at this point. You also qualify for attractive offers like cash back rewards.
e) Excellent Score (800-850)
If this is your score then the sky is the limit. You can get amazing lines of credit from any lender or credit card issuer. It indicates how responsible you are and can be trusted with more than what many people get. In your history, there are no missed or late payments, keeping it clean. You are not likely default on any loan extended to you.
What Is Good Credit?
You might have heard the term countless times but have you ever wondered what good credit is? You have good credit if you make timely payments on your loans or credit cards. Therefore, you have no missed or late payments in your record. A borrower with good credit is termed as a low-risk client and gets several benefits. For one, you can negotiate lower interest rates on loans and credit cards with longer repayment periods. You can make payments without any strain on your finances.
Clients with bad credit are deemed as high risk and incur higher interest rates on loans. Many people lie somewhere in the middle. They don’t have moderate credit score. This is why lenders still make an effort to make products for them. This group makes up a large percentage of the market.
In case you want to get a loan or a credit card with a score that is fair, shop around. You might be surprised by what you find. As you do so, keep taking steps to increase the sore and get a good one. It has more benefits in the end.
Knowing your credit score range and what it means is essential. It gives you a better understanding why some lenders won’t lend you. With a higher score of more than 670, many lenders are willing to listen and lend to you. An excellent score is the best. You get lower interest rates for more money. Lenders are willing to give you longer to repay the amount and other added benefits. Everyone is entitled to one credit report per year that is free. Take advantage of that and let it guide you to improving your score.