WHAT IS A BAD CREDIT SCORE, ANYWAY?
September 23, 2015 / 469
There’s a lot of information out there about bad credit scores, and for the most part, many people are at least somewhat aware of what bad credit is. You already might be aware of the fact that a score under 600 is typically considered to be a high risk score. You may already have heard that people with a credit score under 550 almost always get rejected for loans of any kind. But, most people don’t really understand why bad credit is such a bad thing, nor what having bad credit means to lenders. Here’s what you should know about bad credit scores.
What Is A Bad Credit Score?
Though this may vary from lender to lender, a bad credit score is typically viewed as anything under 600. With mortgages and apartment applications, a bad credit score is usually anything under 620. With car loans, bad credit scores can range from as low as 550 (rare) to as high as 610, depending on the interest rate you want to deal with. Credit cards will typically count anything under 600 as very bad credit, with 650 being the lower limit for good credit cards.
What Does A Bad Credit Score Mean?
A credit score, in general, is a measurement of how likely you are to pay back a loan on time, and how good you are at managing debt. It’s a score that is supposed to show lenders how trustworthy you are. So, in the eyes of a typical lender, a bad credit score is a major red flag, and it suggests that they can’t trust you to hold up your end of the agreement. For lenders, a bad credit score can mean that they will deal with an expected loss, or that it could be an opportunity to charge you an exorbitant amount of interest.
There is some evidence to show that a credit score can be telling. Some statistics suggest that a person who has a 600 credit score will be delinquent on at least one of his bills 75% of the time, while someone with a 720 will only be delinquent 3% of the time. As a result, lenders won’t want to lend to you without charging interest that can at least partially cover a potential loss.
How To Improve Bad Credit
It's not a secret that bad credit can make it harder to make ends meet, and that it can even make finding an apartment a difficult endeavor. But, bad credit does not necessarily mean the death knell of a person’s financial wellbeing. It can be improved – and rapidly, too. If you need help improving credit, you should consider talking to a credit expert about your unique situation. More often than not, you'll be able to see a drastic improvement within a matter of months if you know how to go about it.
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