Having a poor credit score can be a major obstacle when it comes to accessing financial products such as credit cards and loans. A credit score is considered low if it falls between 500 and 600, while a score of 300 to 499 is considered very low. If you have a lower than stellar credit rating, it's important to take action as soon as possible in order to work towards good credit. To achieve a fair, good, or excellent credit rating, there are some steps you can take.
A credit score of 600 or lower is generally considered a poor credit score. If your credit is low, you may qualify for a loan, but the terms and rates may not be favorable. Credit scores between 601 and 669 are considered fair credit ratings. A score of 720 or higher is generally considered excellent credit, while a score between 690 and 719 is considered good credit.
In the VantageScore model, a poor score is lower than 661, which would belong to the fair, poor or very poor credit ranges. It's important to understand the nuances of how your credit ratings are calculated and why your credit score matters. To start, you should review your credit score and identify the cause of any bad credit. You may not have made payments or have accumulated a balance after the due date of your bill. To improve your credit rating, consider the following tips:
- Keep old credit cards open to protect the average age of your accounts.
- Consider having a combination of credit cards and installment loans.
- Pay bills on time.
- Reduce your debt-to-credit ratio.
- Check your credit report regularly for errors.
Bad credit can hinder many common financial activities, such as opening a new credit card or applying for a first mortgage. Credit reporting agencies collect data from lenders and compile it into their credit reports. Lenders carefully examine these reports to determine if you qualify for credit. You might get stuck with lower credit limits and higher interest rates if you have bad credit, and it could even prevent you from getting that new job. Credit utilization, or how much of your available credit limits you are using, is weighted almost as much as paying on time.
There are hundreds of different types of credit scores that lenders use to help make loan decisions. It's important to remember that having bad credit doesn't mean you're doomed forever. With some effort and dedication, you can improve your rating over time and open up more financial opportunities for yourself in the future.
