Understanding Your Credit Score
May 14th, 2009, Written By: Kerri Randall
It’s no surprise the money is tight these days, and sometimes it seems that the only way to solve money problems is with more money. If someone would just drop a large bag of it in your lap, everything would be okay. Instead, you’re barely scraping by but you’re in dire need of a new car (or just a better one) or your family is growing and you’re looking into buying a house. But are you short on funds because of the economy or have you made a few financial mistakes? If your answer is the latter, it’s time to take a serious look at your credit score and what it means.
If your score sits between 800 and 850, you basically have flawless credit and are on your way to a great loan that can buy you a nice tropical island. At minimum (and probably more realistically, anyhow), you will receive the highest credit limits and the best interest rates because you have shown yourself to be completely dependable. A creditor won’t have to think twice about investing in you. Be careful, though, if you just got your first credit card and see that you have an 800. You have this score because you haven’t had time to add any negative activity, but you also haven’t had time to build a positive history. Creditors will still be wary of you this early, regardless of this initial high score.
If you are between 720 and 799, you have “excellent” credit and should have nothing to worry about when looking for a loan. You’re still eligible for high limits and low interest rates. Once you get into the 680-719 range, you become part of the “good” category. You’re doing fine but might end up with a slightly higher interest rate than someone in the next category up.
If you’re in the 620-679 range, you’re in the “good/okay” sector. You rank right there with the average borrower, and you could still acquire a decent loan, but you may have to try a few different lenders before being approved. The highest credit limits and lowest interest rates unfortunately may not apply to you in this category. There may be some restrictions on your loan that someone in a higher category wouldn’t have to accept. This is where you might want to worry and begin taking steps to improve your score.
Once you hit the 580-619 range, you are officially in the “bad” category. You are considered a subprime investment, a definite risk for a creditor. Suffice it to say you will have a rough time securing a loan. If you are lucky enough to get one, it will likely be a low amount of credit and the interest rate might end up costing you more than the loan itself. You should consider seeking some professional advice.
If you’re below 580, and especially below 500, your credit is just plain ugly. You probably have some big black marks on your credit report, such as being sent to collections, going into foreclosure, or filing for bankruptcy. Creditors will not even want to waste time on you because it is obvious to them that you have made some serious mistakes. You definitely want to seek help. It will take time to dig out of your hole, but if you stick to it and are successful, the time spent towards improving your score can only benefit you.
Categories: Credit Score Information
