Guide to Credit Score Levels

Guide to Credit Score Limits

You may know that there are four different levels of a Credit Score Limits, but do you know what each credit score level means? Different credit score levels have a significance, so it is important to understand your score. When you apply for new credit, lenders use your score to predict your credit risk level. Ideally, the higher your score, the better the chances of getting approved for credit (loans, credit cards)

Credit Score Basics:

 One of the main purposes of all credit scores is to help lenders (such as banks and credit card companies) understand how risky it is to lend to you. A high score means you have been a responsible borrower, while a low or poor score means you have a history of poor credit management. If you do get approved for credit with a low score, you can end up paying hefty interest rates.

Related: What Is Credit?

Breaking Down The Credit Score levels:

Credit Score Levels

There are 3 registered credit reporting bureaus in America – Experian, TransUnion, and Equifax each has its own report. You can request a free credit report at AnnualCreditReport.com The information on these reports is used to generate a credit score In general, the score range is as follows.

Poor: 300-500

Anyone who has a score between 300 and 500 may have multiple late payments or defaults on their credit cards, student loans, medical bills, home or auto payments from one or many different lenders. Borrowers with such scores are less likely to get a new credit card or loan. They should first focus on restoring and repairing their score. In order to repair their credit score, they should focus on making on-time payments and may need to apply for a secured credit card.

Related: How To Fix My Credit Myself

Fair: 500-650

Borrowers who fall within this score range can be considered fair or average. They may have some flaws in their credit history, maybe late payments, etc. They may also have low available credit, limited number of credit accounts or new credit history. Lenders are more likely to approve such borrowers’ credit applications, but not at very competitive rates. They may also have limited credit card options.

Good: 650-750

Borrowers with such scores have an excellent repayment history, so lenders easily consider lending to them. People in this category have a history of paying back on time, and may have a good mix of credit, including home loans, student loans, auto loans, and credit cards. The average age of their credit accounts is more than a couple years old. They can easily get low-interest rate loans or credit cards. Those with such a score will have many different credit card options to choose from. With good credit you can begin to open up cash back reward cards and travel cards.

Related: How To Find The Best Credit Cards Based On Your Credit Score

Excellent: 750+

Borrowers within this credit score range, are generally given the green light. Borrowers have demonstrated a history of on time payments. With such a strong score, lenders offer better terms and you may even be able to negotiate lower interest rates. You might be eligible for additional credit card features, such as unlimited charge cards, cash back rewards, travel rewards, interest free for 12 months etc. So, make sure you create such a score to enjoy all the credit benefits in life.

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How Can a Credit Score Affect Your Financial Life?:

You might be wondering “what’s the big deal with having a low credit score?” Well, if your score is poor then most of your financial decisions can be affected. Your loan on your dream home or car may not be approved or you may have to pay high interest rates on your loan or credit card. Credit application may not be approved if your credit score is poor and many lenders may not take the risk of lending to you. Therefore, if you have bad credit and apply for a loan or credit card, your application may be denied.

High-interest rates on credit:

 A low credit score means you have a higher risk of lending. Therefore, lenders make up for this risk by charging you higher interest rates on loans or credit cards. If you have a good score you can negotiate a better interest rate.

Higher Insurance Premiums Globally:

 insurance companies also check credit. In general, they charge higher premiums for those with poor scores. When you repair your credit score it might be beneficial to call your insurance company or get a new quote. Many Insurance companies in America have started using credit scores of the applicants.

Related: How To Waive Annual Fees On Credit Cards

Final Thoughts

You have already taken the first steps to learning more about your credit and how it impacts your life. The truth is they never teach a lot of this information in school, so its not your fault if you never knew how the different level credit scores could effect your life. If you are getting ready to buy a new home, car or apply for credit cards, it’s important to have your credit score looking the best it can. If you’re ready to fix, repair, or grow your credit score then check out our training course!

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