Good and Bad CreditScore: Your credit score isn’t just mere numbers – It is rather, the key that unlocks your financial freedom. A good range of your credit is a key capable of ripping credit cards, loans, and housing rentals at the lowest interest rates. Having a bad score is frustrating, time-consuming, and often doesn’t turn out well.
Good credit is very essential. It has an effect on almost every major buying decision. Good credit can help us get a good rate on a credit card, car loan or even a home mortgage. It can also help us when it is time to sign an apartment lease agreement or even get a new job.
Unapologetically, many major life decisions, from buying a new car to sending your kids to college, revolve around and depend on that 3-digit number. So what is the range that determines your financial state?
You’re in a bad category if you have a credit from 620 and below. Whether you are just getting your first credit card and have no credit history, missed multiple payments, or filed for bankruptcy, those in this category are going to have much higher fees and interest rates.
Those with 620 and 680 score are said to have fair credit. This is an average score, and most lenders will still not trust you with better interest rates or credit cards.
Once you cross over into the 680-740 range of good credit score, you will start getting lower rates and better credit card deals.
However, if you find your score above 740, your excellent credit rating will permit you apply for premium credit cards with great rewards programs, as well as getting the lowest interest rates on car, auto, and student loans.
These ranges are always changing, so a bad score may not be bad a year from now, and a good score could downgrade to a fair score without warning, so it is important to keep up with any changes so you don’t get surprised when you apply for your next loan or credit card.
What exactly does bad credit mean?
Bad credit simply implies that you failed to pay your past credit obligations on time (if you paid them at all) with your credit agreements and inability to get approved for a new credit. There’s absolutely nothing good about having a bad credit as credit bureaus collect your credit history and it is then compiled into a credit report.
The information is then used to calculate your credit score, a three-digit numerical snapshot of your credit history at any given time. Credit scores usually range between 300 to 850. (Lower numbers indicate bad credit score)
How will having bad credit affect me?
Having a bad credit can cause your application to be rejected as lenders are less likely to provide you a loan. Lenders are worried that you may fail on any credit card or loan given to you. If you luckily received an approval, the chances of having to pay a higher interest rate compared to borrowers with good credit score is also high.
It is the lender’s way of compensating the risk of loaning money to you. It does not only affect your credit card, loan approval and interest rate, insurance companies will check your credit score to provide you an insurance rate as well.
Besides that, security deposit will also be charged to applicants with a bad credit score, by utility and cell phone providers. Also, you may have to provide landlords with a higher security deposit, or they could turn you down for an apartment altogether!
How to know if you have bad credit?
If you have been keeping an eye on your finances, you probably will have an idea of whether you have bad credit. From there, you will know whether you have missed payments or have an existing large credit card balance.
If you have a recent credit application that was turned down, your interest rates has increased, or your credit card providers has lowered your credit limits, it is a sign of having bad credit.
You can also check your credit score from either CTOS (free for the first 2 reports after signing up, RM25 will apply for the third report onwards) or use CCRIS for free (your report is updated monthly).
How to fix a bad credit score?
Nothing is permanent. You should try these necessary steps to improve your credit score over time.
Step 1: Focus on getting rid of negative information from your credit report either by using a credit report dispute or a credit repair technique.
Step 2: Add a positive information to your credit report by adding new accounts and paying them on time.
How Your Habits Affect Your Score
The bad news is that if you make mistakes and miss too many payments you can quickly go south. The good news is that by being smart with your money and getting help when needed, it’s relatively easy to rebuild and increase credit.
Sadly, having bad credit is quite easy. While your credit rating will not fall if you make a few late payments, the money you owe will definitely lower your score over time, forgetting or not being able to pay back. Insolvency filing also reduces the score a lot.
Pay off your debts in order to maintain good credit or fix bad credit. Making payments on time for money that you owe will increase your credit rating gradually, even if you fall into the category of “poor.”
The card provider records the fee to a credit office each time you use a credit card and then pay it off. So, every on-time payment is like a note that you leave the office saying “I’m reliable.” The factors of the office in these little notes when they increase your credit score.
You’ve seen how expensive it can be to keep bad credit and how much cash you can save by progressing to higher levels of credit scores.
The best way to manage your credit is to test your ranking through one of the major credit bureaus – TransUnion, Equifax, or Experian – for free, once every year. Knowing your number will help you increase or maintain your score, and you will be glad next time you apply for a loan or credit card.