Credit Score Range Meaning
Credit scores are an essential aspect of your general finance profile. These scores are not only crucial. They are what lenders and financial institutions use to determine whether you qualify for some of the many economic benefits' like mortgages, car leasing, and personal loans.
Some employers will run a hard credit check on your financial profile before they can trust you to work for them.
Considering that many families carry some sort of debt. In that case, it is essential to note that a good credit score is necessary and should be part of your present and future plans. It is what will sail you through most of the financial hardships that you may encounter.
This article will strive to inform and educate you on the meaning behind credit score numbers and the benefits to having an excellent credit score.
To understand the legitimate meaning behind the numbers, first, you must understand how the numbers are set.
There is more to your credit scores than you might imagine. Whether your score appreciates or depreciates, your lenders may lend or deny you the amount of money you require.
This article explores information from two credit bureaus - Equifax and TransUnion.
How are the scores set?
For your credit scores to be set, credit bureaus scrutinize your financial profile and use the information on them to see where you stand financially. These bureaus use factors such as your payment history, how much debt you owe, and the duration that you've been using credit to determine your credit score.
So, what does your range on a credit report actually mean?
Generally, your credit score can range from 300-900. The higher your credit score, the better. On the contrary, if you have a lower credit score, you are inclined to be denied options by most lenders. The good news, though, is that bad credit can always be rebuild.
Here is an average breakdown of what each range means regarding your ability to qualify for a line of credit, a personal loan, or a mortgage. It is important to note that credit score ranges can vary depending on the provider.
In reference to Equifax and TransUnion.
This is an excellent credit score. You are encouraged to keep reaching for the stars. With this score, all lenders will be inclined to work with you. A perfect credit score shows nothing more than a tremendous financial responsibility, and this is what lenders want to see.
This is an incredibly good credit score, which means you have healthy financial habits. Still, your chances of getting a variety of credit choices are very high. Most lenders won't hesitate to work with you.
Lenders consider this a good credit score. You may not be eligible for lower interest rates with a good credit score. Still, you can navigate the market and access most services offered by lenders. This is usually the foundation of building greater heights with credit scores.
This is considered a fair credit score. If you have a fair credit score, you must demonstrate a solid sense of financial responsibility before lenders can trust you. This means you have to prove that you pay all your bills and loan repayments on time.
This is a bad credit score that needs some work. A lot of work, actually. Some lenders will go above and beyond to offer you their services when you have a bad credit score. This means you should also be ready to pay higher interest rates.
Factors that can bring your credit score to rock bottom may include:
Missed or late bill payments.
Too many open or also few open credit accounts.
Higher credit card balances.
High balances on your loans.
Too many credit applications.
There is no shortcut to improving your credit score. You must practice good financial habits and be consistent. Getting an excellent score should be your ultimate goal.
What are the advantages of ranking high on the credit score scale?
You can navigate life with a bad credit score, but it is undoubtedly strenuous financially and emotionally. Striving for a good and excellent credit score will surely save you money and make your life less of a hassle.
Below are five benefits to having an excellent credit score:
You get lower interest rates on loans and credit cards.
Interests are what you pay for borrowing money. If you have an excellent credit score, you will qualify for the most incredible interest rates. This means you will pay fewer monthly charges on credit card and loan balances-the lower your interest rate, the faster your repayment.
You have a high chance of credit card and loan approval.
Even though an excellent score doesn't guarantee approval, ranking high on the credit score scale increases your chances of being granted a new line of credit or mortgage.
You get more negotiating powers with an excellent credit score.
When shopping around for better rates, an excellent score gives you an added advantage. Compared to someone with a bad credit score, you have the flexibility to bargain rates from different lenders without the fear of lacking options.
You have the chance to qualify for higher limits.
With an excellent credit score, banks and other lenders are willing to let you borrow more money from them because of your sound repayment track.
You get better insurance rates.
Insurance companies are on the list of companies that will use your credit score against you. They use your credit report to develop your insurance risk score. This means people with a bad credit score will end up paying higher insurance premiums. Having an excellent credit score not only allows you to pay lower premiums but also enables you to shop around for betters premium rates with confidence.
It is your responsibility to keep your financial status as healthy as possible. You can do this by regularly reviewing your credit reports. This will help you make better choices when applying for a loan or a credit card. You can always refer to this source when you need a point of reference. Or when you need to understand what your credit score numbers actually mean and the benefits you get by having an excellent credit score.