Most people can give a good guess about the state of their credit. For most people their score is good, or fair, which is the most favorable spectrum for you to land on. If you think you have bad credit there are a few ways it can affect you in your everyday life? We can help you understand what exactly a ‘bad credit score’ is and how it affects you.
The Credit Scale
Lenders don’t use a generic credit rating system so even if your credit scores on FICO® and VantageScore are ‘technically’ the same, they’re actually totally different. FICO® is the most commonly used credit rating system for lenders and scores range from 300 to 850; the higher your score on this scale, the better. The other thing you need to be aware of with the credit scale is that it is not FICO® or VantageScore or any of the other systems that determine whether your score is good or bad. It is the lender you are dealing with that makes the decision.
What is a Bad Credit Score?
You could really argue that there is no such thing as a bad credit score, that it is something devised by lending companies to make the most possible money from their clients. Unfortunately though, the reality is that the power lies in the hands of the lender. If your credit score is bad, there are risks for a lending company to take you on as a client. The bad credit rating then means that you also have a low approval rating.
The General Gist
Thankfully you can rest assured, most companies and lenders take similar stances on credit scores. If the credit rating system your lending company uses ranks scores between 300 and 850 you can follow this table to know where you stand:
- Below 600 – You have bad credit. Lending companies probably won’t approve you for a loan.
- 600-649 – Your credit score is poor. Lending companies will offer you less favorable interest rates and terms. You might be deemed a ‘potential liability’.
- 650-699 – Your credit score is fair. You will be most likely offered decent terms and rates on loans.
- 700-749 – This is a good credit score. You can be prepared for some of the best rates or something very similar to your lender’s best rates.
- 750+ – This is an excellent credit rating. You will get the best terms and interest rates from pretty much any lender.
How does Bad Credit Affect You?
Bad credit can affect you whenever you are applying for a loan, trying to set up a monthly bill, and many other ways. It means that lenders are less likely to approve loans that you apply for.
What Can You Do?
There are ways to improve your credit rating though these can take time. If you need to take out a car loan check out this article to see if there are any alternatives available to you.
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