The credit score is said to be among the most crucial aspects that define a person’s financial life. It shows the kind of loans and credit cards one can access and the interest rate that will be levied on the loan. Credit scores in most cases are between 300 to 850. Credit scores below 580 are classified as poor or bad credit while scores above 670 are good to excellent credit.
There are five main levels of credit scores:
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Exceptional Credit (800-850) This is the highest credit tier, and it shows that the credit rating of the individual is very good. People with credit scores ranging between 800 and above are regarded as having the best credit reputations in how they handle their financial affairs. They always make on-time payments, maintain low credit card utilization, have an active and diverse credit mix, and long credit history.
Benefits of exceptional credit scores:
- Get the best deals on loans and credit cards such as the lowest possible interest rates
- Prime chances for mortgage, auto loan, and premium credit card approval
- It may lead to lower insurance premiums
- Low initial payment to connect utilities such as electricity, water, and even obtain a cell phone.
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Very Good Credit (740-799) The very good credit tier implies that the credit risk is above the average. Banks and other lending institutions consider people with scores in this bracket very reliable and any borrower falling in this bracket will be offered the best terms next to those with a perfect score.
Benefits include:
- High approval probability for mortgages, car loans, and low-interest credit cards
- She can also leverage the low interest rates offered on loans and credit cards
- May be able to get better insurance deals
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Good Credit (670-739) A good credit rating is slightly higher than average and proves creditworthiness to the lending institutions. Those people with a good credit rating have access to almost any program, but this does not guarantee they have the best terms available.
Benefits include:
- Reasonable approval chances for the mortgage, auto loan, and credit card.
- Low interest cost of money on loans and credit cards
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Fair Credit (580-669) Low credit scores are lower than the national average but high enough to merit approval for a loan. Borrowers will get approved but at a higher interest compared to those with good or better scores and they will have fewer choices of lenders.
Those with fair credit can benefit by:
- Can get a majority of loans and credit cards, but may not get the best rates or conditions
- Exploiting subprime lenders who focus on fair credit risks
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Poor Credit (300-579) Having a bad credit, which is below 580, will make it hard to be approved and the few who will be approved will be charged high interest rates and fees. Low credit is associated with credit risk which requires credit repair. The negative impact of score damage is that deals with late payments, collections, judgments, or bankruptcy in the recent past have a negative effect.
This means that only those with good credit scores will access traditional loans and credit cards easily. Subprime lenders are available but they come with expensive interest rates and charges. The benefit is primarily in reinstituting credit to reconstruct the scores. Credit repair means looking at the reports and complaining if there are negative items, paying all the bills on time in the future, maintaining low credit utilization ratios, and avoiding subsequent late payments. However, poor scores may be brought back to higher ranges over time with constant efforts on repair.
In conclusion, credit scores over 670 will receive easier approval than the highest rates and interest rates while a credit score of 580 or below makes it difficult to be approved or be given the best rates and terms you will be charged high interest. Consumers can see where they are on the scale, engage in handling scores, and move towards the best credit score achievable by being familiar with the five main levels. By practicing responsible financial behaviors and keeping a regular check on credit scores, it is possible to strive for and achieve high scores given the benefits accrued to being creditworthy.
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