Your credit score can tell how responsibly you have managed your credits. Nowadays, most lenders use credit scores to determine a borrower's financial behavior. Apart from deciding the eligibility, a credit score can also determine the amount of loan a person is eligible for alongside the interest rates and credit limit.
What is a credit score?
A representation of an individual's credit worthiness, a credit score is a three-digit number that ranges between 300-900. It plays a major role when it comes to credit cards and loan applications. In general, a credit score of 750 and above is considered to be a good credit score.
Credit score ranges
As already mentioned, credit scores range from 300-900. However, 850 is considered the best credit score.
What is a bad credit score range?
A score range from 300 – 549, is considered a bad credit score. It is believed that credit scores below 550 will result in a rejection of credit card or loan applications. So, if your score is somewhere between 300-549, you must work on improving it.
There are some types of loans, like home loans, that are hard to acquire with a score in this range. However, there are still other options you can get with a poor credit score.
What is a fair credit score range?
A credit score range from 620-679 is a fair credit score range. This number is considered to be risky by lenders and is more likely to be approved for credit.
Please note that individuals in this range are prime borrowers, which means they are eligible for higher loan amounts, higher credit limits for credit cards as well as loans.
What is a good credit score range?
If your score is somewhere between the range of 680-739, it is considered to be a good credit score range. Almost all borrowers with a credit score of this range will face no issues while applying for a credit card or loan.
What factors affect your credit score?
There are a number of factors that affect your credit score, including-
How to improve your credit score?
“How do I improve my credit score?’- is by far one of the most common questions asked by people who are dealing with bad credit scores. The good news is- there are several ways by which you can boost your credit score. Here’s how.
What are the pros of having a good credit score?
Lower Interest Rates on Loans
When it comes to having a good credit score, this is one of the biggest benefits. We all want to avail low-interest rates on loans, don’t we? With a good credit score you can get loans at reasonable interest rates. This, in turn, will help you to repay your loans faster and further reduce a significant amount of financial burden.
Even if you can save a little bit of amount on big-ticket loans, it will help you save a lot of money in the future.
Higher Credit Limits
Your income along with your good credit score is a key determinant of your loan or credit card approval. These can either get you a higher loan amount or higher credit limit on credit cards or lower loan amount and lower credit limit, depending on your credit score.
In general, lenders will determine your creditworthiness and consider you to be a creditworthy individual based on these two factors. If you have a low credit score, you may get a loan or credit card with lower interest rates and low credit limit. A good credit score, on the other hand, can help you attract a higher loan amount and high credit limit.
Improved chances for loan and credit card approval
The first and foremost thing that lenders do before approving your credit application is evaluate your credit score and report. This procedure is termed as hard pull or rather hard inquiry, which can leave a negative impact on your credit score, in case your application is rejected.
However, if you have a good credit score, your chances of getting approved for credit cards and loans naturally increases.
More Negotiating Power
With a weak credit score, you can acquire loans at higher interest rates. Moreover, repayment of such loans can become burdensome in the long run. Borrowers will also not have any power of negotiating to lower the credit score. Whereas, individuals with a good credit score will have a better chance of getting their loan and credit card applications approved and also have the power to negotiate for affordable interest rates.
The Bottom Line
No matter how good your credit score is, if you have a negative record on your credit report, it may hurt your chances of getting approved for a loan or credit card. And while credit scores don’t take your income into consideration, lenders surely will. That said different lenders have different sets of terms and conditions, so your experiences may vary likewise.