Credit Score Rating Scale
Credit Score Rating Scale
Do you know how high or low your credit score is? No? Well, generally, what you don’t know won’t hurt you. But in this case, let’s make an exception since you could be paying a price for not knowing. Take a look at the credit score rating scale below and you’ll see how different credit scores impact your financial future.
Your options open up with a good credit score rating.
What is a credit score and why is it important, you may ask? A credit score is a statistical technique to determine your ability to return the money you borrowed on time and how well you handle your credits and debts. The higher the score, the better. It is intended for lenders to find out your probability to pay back your loan. The factors that are taken into consideration when evaluating an individual’s credit report score rating include the person’s credit payment history, current debts, time length of credit history, credit type mix, and frequency of applications for new credit.
Here’s a rough guide to the credit score rating scale numbers
800 and above: You have excellent credit and will likely be able to receive a lender’s best interest rates. You actually have the luxury to shop around and insist for the most promising conditions with an interest rate equal to the prime rate, or even below it. With regard to credit cards, you should be able to acquire an interest rate under 10 percent instead of the common 18 percent or higher.
750 to 799: Falling in this range of credit scores will still get you good rates and approved for any type of credit loan or personal loan, be it unsecured or secured.
720 to 749: Approvals are almost always guaranteed but interest rates might not be quite as favorable. This is practically the average credit score range.
675 to 719: When your credit score hits below 720, you might notice that the rates you are quoted aren’t the best. That doesn’t mean you won’t be approved, but you will have just a little difficulty finding a good loan.
620 to 674: This is the range for below-average credit scores. If your score is within this range, your options will surely be narrowed down. Also, you’ll pay a premium on your loan, possibly as much as 2 percent more than those with better credit. You may also be required to provide more documentation than they do, including more scrutiny on your home’s appraisal for mortgage loans.
580 to 619: 620 is the bottom cut off for prime loans and considered the dividing line between fair and bad credit. A credit score under 620 clearly puts you in the category of a “sub-prime” borrower. Nevertheless, you can still get an unsecured personal loan and even a mortgage, but the terms and interest rates won’t be very appealing. You are likely to pay approximately 3 percent more than those with excellent credit.
500 to 579: You can still get a loan but don’t be expecting much, doing so will just cause you heartache. Some people with credit scores that falls in this range apply for loans to consolidate debt in order for them to have a fresh start. With this credit score, you are highly recommended to repair your credit as soon as possible.
Below 500: You need professional help with your credit as the credit mistakes you are making are too serious and too many, and they will only get worse if you don’t do something about it.
Important to Understand Credit Score Rating Scale
Understanding this rating chart and its significance is important. Not paying attention to it can be unfavorable to your life in many aspects. Poor credit can impact the price of your car insurance and even your job search. Improve and maintain your credit score by making payments on time for the right amount. Keep your outstanding debts as low as possible. Do not ignore your overdue bills, and the like.
By keeping the credit score rating scale in mind, you are heading down the path of enhancing your overall financial growth.