A bad credit score usually if it falls below 630 on thebasis of the two most prominent credit rating agencies rating namely FICO andVantageScore.
Bad credit can be an obstacle between lines of credit approval you if you are not doing some planning. It may lead you to either rejection or approval, at a higher rate. However, you can get sure approval with good credit score certainly at a lower rate.
Every lender and issuers have their own measures forapproval, but here’s how they typically gauge you.
|300 – 629||Bad credit|
|630 – 689||Fair credit|
|690 – 719||Good credit|
|720 – 850||Excellent credit|
How bad credit can impact a person
Lenders will not try to attract you & try to make you a customer if your credit score is below 600.
You will get rejection directly. Lenders determine the levelof risks they are going to take individually and may also take into account the extension of credit scores.Sometimes you may also get a rejection even you have a score of 700, it alldepends on the decision of creditor.
If you get credit withthe bad score the lender will likelycharge a higher rate if compared with a person with a higher credit score. For example, you will not be eligible for 0% creditcards or personal loans at one-digit interest rates.
Moreover, lenders may charge a subprime rate for your car orhome financing. On the other side, youmust have to pay utility deposits while people with higher scores can easilyskip. Besides to all above, you may have to pay higher for insuranceno matter auto or home.
Fortunately, credit scores are volatile in nature andsubject to frequent change on the basis of multiple factors.
How one can improve credit score
It’s often a long-termprocess to move your bad score towards a good one and it’s very important to plan things before. Especially one must knowwhere to start and which aspects to focus on.
The most important factors are on-time payments and the utilization of credit. This means that you need a track record of payments made by the due date. While on the other side you will also need to maintain your credit card balance which must remain below 30% of your credit limit. If your bills are usually late and your balance is close to your credit limits, then probably results will not be satisfying.
Some financial products can help you out to rebuild your credit score or to improve your credit to anext level, here we will suggest some worthy options;
- Secured Credit Card: A secured credit card is supported with a cash deposit. That deposit is originally your cash money submitted at the time of account opening. Deposit is generally equal to your credit limit, that’s why you will get $500 credit limit when you deposit $500. Keep your balance as low as possible and pay bills on time.
- Credit-building loans: After paying off the loan, a loan amount is again available to you. Ensure that your bank forwards the report of payments to major credit reporting agencies — 3 major agencies.
- Become a co-signer: If you are successful to add yourself as an authorized user of a credit card as a co-signer with someone who has enough history for nice credit utilization & on-time payments.