It’s a simple three-digit number. It ranges between 300 and 850. Yet when you ask, “What does my credit score mean?” the answer you receive can be as complex as the number itself is simple.
In a nutshell, a credit score tells a lender how likely you are to pay back a loan based on your credit history. This is called creditworthiness. Your creditworthiness as a credit score is calculated using the information on your credit reports. FICO® Scores have become the standard and are used by approximately 90% of top lenders.
That means your credit score influences the credit that’s available to you and the terms lenders may offer you.
Now that you know basically what a credit score is, you’re probably still wondering, “What does my credit score mean?”
The Basics of A Credit Score
The most common way to refer to a credit score is in one of four categories—Bad Credit, Fair Credit, Good Credit or Excellent Credit.
300 – 629 = Bad Credit
630 – 689 = Fair Credit
690 – 719 = Good Credit
720 – 850 = Excellent Credit
What do those categories mean?
When you have Bad Credit, it can be difficult to qualify for additional credit—credit cards, home loans, auto loans, debt consolidation loans, etc. With bad credit, when you find yourself in a situation where you need to borrow money, you’ll probably have limited options. If you have a credit score in the low 500s for example, you could still find lenders who are willing to extend credit to you; however, you’ll probably end up with a very high interest rate or other conditions such as a secured credit card that requires you to deposit money into an account to cover your card’s credit limit. You could also end up paying higher premiums for your car insurance or being forced to pay deposits for your utilities.
With Fair Credit, you’ll have a few more options for borrowing. Even so, you’ll probably pay higher interest rates and still have extremely limited options for credit cards.
As your credit score improves, your borrowing options improve as well.
Good Credit often allows you to find lower interest rates. Typically more lenders will be willing to extend loans to you and you will likely have many more credit card options.
Excellent Credit is preferred by lenders. When you have Excellent Credit, you can apply for most rewards credit cards, receive the lowest possible interest rates, and have a wider range of possible lenders from which to choose. In fact, borrowers with scores above 750 could qualify for 0% financing on automobiles and 0% interest credit cards.
Your Credit Score is only part of what lenders review.
In fact, a good credit score does not guarantee that you’ll be approved or receive a good interest rate. Your income and your current debts are crucial in some lending decisions. Lenders will use a debt-to-income ratio calculation to evaluate whether you can repay the loan and what interest rate is worth the risk for them.
It’s possible that you can be deep in debt and still have great credit scores if you pay your bills on time.
The reality of your credit score is that it matters most when you’re trying to borrow more money. If you’re already struggling with overwhelming debt, it might not be your credit score that worries you most. It might be whether you can make your minimum monthly payments and still buy groceries. If that’s the case, you should consider debt relief.
CreditAssociates can help you get out of debt while lowering your monthly payment. Best of all, if you qualify, you’ll pay a fraction of what you currently owe.
With CreditAssociates, you can get out from under your credit card debt in 24-36 months with an affordable plan that will ease your frustrations and give you a clear path to becoming debt-free. CreditAssociates can settle your debts just like our team has for over 270,000 accounts for people all across the country just like you.
With our services you can:
1. Select your plan.
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3. Watch us resolve your debt.
Don’t let the high interest of credit-card debt ruin your life. Live better, debt-free.