You know that your credit score is not as good as you’d like it, but is it bad?
According to one source, 53% of people have been turned down for loans or credit cards due to their poor credit scores.
So, what is a bad credit score?
Knowing the difference between a good credit score and a bad one can help you determine where you stand. Finding this out might also help you understand your loan options with the score you currently have.
Why Does Credit Matter?
You might know that bad credit is not a good thing in life, but do you understand why? Before you can understand what bad credit is, it might be helpful to learn why credit matters.
Lenders determine if they will approve your loan and credit applications based on several things, but your credit is the primary factor.
Your credit score tells lenders how responsible you are with your debts. A low score reveals that you might not pay your bills on time, and lenders might be leery of loaning you money if this is the case. You might be too much of a risk.
A person with a high score has excellent credit because he or she has managed it well over the years. A person like this pays his or her bills on time and poses low risks to lenders.
How Do Bureaus Rate Credit?
Several credit bureaus track consumers and their scores, and most use the same models. Most bureaus have credit scores that range from 300 to 850.
300 is the lowest score you can have, while 850 is the highest. Only 1.2% of all individuals have perfect scores.
The bureaus classify scores into ranges, and most use five categories. The categories range from poor to excellent.
What Is a Bad Credit Score?
The categories that bureaus use show that a score of 670 or higher is good. As the score increases from this point, it keeps getting better.
A score below 670 is not good, but your score is really not bad unless it is below 580. So, if you have a rating that is less than 580, you have bad credit.
Aiming to have a higher credit score can help you qualify for more loans. You could aim for a perfect score – if they are possible – but you don’t need a score this high to get loans.
The good news is that you can improve your credit score if you try. One option is by taking out small loans and repaying them on time. Another option is getting a secured credit card and using it responsibly.
How to Get a Loan With Bad Credit
Now that you have the answer to the question, “what is a bad credit score,” you might want to look for loan options you can get.
Payday loans are one option to consider if you have bad credit, as they don’t require credit checks.
Would you like to learn more about bad credit loans? If so, check out our website to find more information on this subject.