A good credit score is crucial for your overall financial health. Your average fico score affects all your financial activities. These activities include making big purchases, requesting credit cards from the best credit card issuers, getting an insurance policy, or applying for a personal loan.
Money lenders determine the creditworthiness of the borrowers by checking their credit scores. The credit score depicts the borrower’s ability to repay the loan. However, you may get bad credit loans with tough loan terms. The money lender may find you eligible for a bad credit loan, but there is a higher risk of losing the money. Hence, bad credit loans come with high-interest rates, tough repayment schedules, and late payment charges.
Typically, the higher the credit score, the better your chances of loan approval. Therefore, it is essential to maintain or improve a good credit score to get better loan offers. So, What Is A Good Credit Score? Let’s find out here.
Factors Affecting Your Credit Score
Many Credit Bureaus such as Equifax, Experian, and TransUnion calculate your credit score using various credit scoring models based on your financial history. Major factors affecting your credit score include payment history, outstanding debt, age of your credit account, and hard credit check. Firstly, your payment history is the most critically checked factor of all. The creditors check whether you pay your dues on time or not. Even a single late payment can decrease your credit score. Therefore, it is essential to pay all your bills on time.
The second important factor is “outstanding debt.” Your outstanding debt is the total amount of money you owe to different lenders at any time. Certainly, high outstanding debt reflects your inefficiency in paying your debt per repayment schedule, thus making you a high-risk borrower. The lower your credit card balances, the better your credit score will be.
Another critical factor that affects your credit score is the age of your credit account. This factor reveals your experience in handling the credit and punctuality in following the repayment schedule. Hence, keeping your oldest credit account open is best to gain new lenders’ trust.
The credit inquiries performed by the money lenders also affect your credit score. Generally, soft inquiries do not affect your good credit score. However, a hard credit check will show up in your credit report for a year, thus affecting your credit score. In a nutshell, credit bureaus evaluates your repayment and credit behavior to measure your credit score.
What Is a Good Credit Score?
300 to 900 is the good credit score range. Generally, 700 and higher is considered a good credit score for loan approval. People who maintain a credit score above 700 are considered trustworthy for sticking to the repayment schedule. Nonetheless, money lenders may offer bad credit loans provided you give them proof of your stable source of income.
Is 650 a Good Credit Score?
Typically, a 650 credit score comes under the “fair” category. Indeed, not good enough, but you will be eligible for various financial products, including loan offers. But you will have to pay a higher interest rate than the person with a better credit score. In general, a credit score below 630 is a bad credit score.
Benefits of Having a Good Credit Score for Loans
Indeed, you can avail a variety of financial products with a low credit score, but at an expensive rate. Contrarily, a good credit score improves your financial health and helps you make the best of your finances. Following are some major benefits of a good credit score.
- Better Chance for Getting Multiple Loan Offers
People with good credit scores can secure multiple loans offers from different money lenders. Multiple loans give you an edge in picking the best offer per your financial situation.
- Low-Interest Rates on the Loans
The interest rate is the cost of borrowing the money that all borrowers must pay throughout the repayment schedule. However, people having excellent credit scores often get loan offers with the lowest interest rate. On the other hand, the interest rate is considerably high in bad credit loans.
- Quick Loan Approval
Generally, the money lenders evaluate your reliability and the ability to timely loan repayment via your credit score. A good credit score means you have a good payment & credit history, and your previous lenders trust you with their money. Hence, your loan application quickly gets approved.
- More Chances of Getting Loan With Higher Credit Limit
Your loan amount depends on your credit score and the stability of your income. The money lenders are willing to offer you higher loan amounts considering your good credit score and reliable source of income.
- Discount on Interest Rate and Other Charges
Securing a loan offer with a good credit score gives the borrower power to negotiate loan terms with the money lender. You can ask the lender for a discount on the interest rate, loan processing fee, or other similar charges.
Tips to Improve Your Credit Score
- Be punctual in paying all payments, including credit card bills, utility bills, rent and mortgage payments, medical bills, taxes, and parking tickets.
- Keep checking your credit reports for errors and ask for correctness as soon as possible in case of inaccuracies.
- Keep your credit utilization low.
- Do not close your oldest credit account.
- Avoid opening multiple credit accounts in a short time.
Wrapping Up
In short, having a good credit score can help you get better loan offers. A high credit score means that you are a genuine borrower who can responsibly repay the borrowed money, hence making you a low-risk borrower. In turn, the money lenders offer you a loan with low-interest rates, better repayment plans, higher loan amounts, and longer tenure.
Whether you have a good credit score as suggested by any good credit scoring model or looking for a bad credit loan, it is essential to consult a reliable money lending source. Easycashtexas can help you find the best lenders in town who are reliable, trustworthy, and offer competitive loan terms.