Every borrower and financially aware individual knows how important a credit score is. It is one of the factors that significantly affect a person’s likelihood to get approved for a loan. If you are in the lowest credit score range and you get approved for a loan, your interest rates and monthly payments will be high.
In case you’re among those people who don’t know what a credit score is, it is the yardstick used by lenders to gauge your capability to pay the loan you are applying for and if you have existing credits.
Different Credit Score Ranges
A credit score ranges between 300-850, which corresponds to a person’s creditworthiness. To better understand it, here is what your credit score range says about you that will reflect on your loan and credit card applications.
818- 850
In school, this credit score is considered as the A to A+. In the financial world, it is a credit score range known as the Superprime. It will show lenders that you handle your finances very well. This credit score suggests that you pay your obligations, such as credit cards, bills, and loans, in full and on time every month.
Even if your credit score showed a low score in the past, it would only prove that you work hard to earn the highest point of your credit score by managing and being responsible with your finances.
727- 817
Only second to Superprime, the Prime Plus is a credit score ranging from 727-817. This score is still an excellent score that can ensure that lenders will likely approve your loan application. When lenders see this credit score, they will think that you take your credit obligations seriously.
This credit score is an indication that you work hard to build your credit reputation by doing the right thing on your financial decisions. Continue what you are doing to achieve the Superprime score on your credit history.
636- 726
This credit score is considered as the Prime score of your credit history. Although it is a little bit low, it is still acceptable for most lenders. These numbers can give the impression that you are just starting to build up your credit score or have made a few mistakes in handling your finances, mostly your debts.
However, you still have the chance to be approved by lenders as this score is still considered a good credit score. But you have to be more cautious in your obligations to improve your score even more.
546- 635
Considered as a Non-Prime credit score, this is a score that is slightly below the line. It is already considered a low credit score. A Non-Prime credit score can give lenders the impression that you are going through a tough time on your finances that resulted in late or non-payment of bills or debts.
It can also indicate that you are starting to bounce back from previous setbacks. If you are currently rebuilding your credit reputation, it might take up to several months or years before you can recover.
300- 545
This score is considered as a High-Risk for lenders, which is a red flag for them. With this credit score, you are highly unlikely to be approved with a loan application. Lenders will look at this credit score as a sign of bankruptcy, which means that you are incapable of paying any debts.
But do not lose hope. There are still lenders willing to give individuals with a low credit score a chance to acquire a loan. Just be careful in choosing a lender who offers this service. Make sure that you are applying from a trusted lender to avoid any mishaps.
Good Credit Score Can’t Ensure Approval
People with a low credit score are not the only ones who suffer a loan denial. Even a person with a good credit score can experience this. There are factors that even if you have a good credit score, a lender might deny your application.
Some of the factors are debt burden, low income, and the fast surge of debts. The lender will also take into account the company where the credit score is from. The most utilized credit score is FICO. It is also the most trusted score by most lenders.
Another factor affecting your chance of being approved, even with a high credit score, is your previous negative report. Although these records will be deleted after seven years, some lenders have their specific rules. For instance, you have previously experienced bankruptcy, and when the lender knows about this, they may reject your loan application.
If you encounter this problem, you can always find another lender that will consider your situation as long as they see that you have regained your financial status by working hard in fulfilling your financial obligations.
Takeaway
It is important to build a good credit score by strictly paying all your obligations, such as your debts and bills, on time. Even though you are not planning to apply for a loan, it is still best that you have an excellent credit score as it also reflects how responsible you are in all of your financial obligations.
Author Bio:
Karla is a young freelance writer and blogger that focuses on loans, credit cards, and credit scores. She grew up in a family of businessmen, which honed her knowledge in this industry that she is now using in her career.
