Possessing good credit is a necessity in our society if you want to have all kinds of different options open to you, and what ultimately determines the quality of your credit in the eyes of those who are concerned with it is your credit score. That score tells a story about you, your finances and your level of responsibility.
Fortunately, credit scores are adjustable, and if you are the less-than-proud owner of a “bad” credit score, you can improve it with some hard work. But what is considered a bad score? You can find out the answer to that question here, as well as discover how bad credit can adversely affect you and how you can turn it into good credit.
Lenders look at your credit score when they determine your creditworthiness. Good credit scores start at about 680 and go up from there, with average credit scores ranging from approximately 620 to 679. At the same time, there is a wide range of figures that can be considered below-average credit scores, and depending on exactly where it falls, your score can be classified as poor, bad or extremely bad.
The bad credit range generally is considered to start at around 579 and go down from there. Between 579 and 500, bad credit scores devolve into very bad credit scores, and extremely bad credit scores start just below 500.
The Effect of Bad Credit
Bad credit scores cost you money. It is as plain and simple as that. Starting at a score as high as 619, a consumer can begin to feel the consequences of having a less-than-average credit score. With a mediocre score will come higher interest rates, which will hamper your financing ability and lead to lenders possibly requiring additional information from you to mitigate their risk. Credit scores at the bottom end of the 580 to 619 credit score spectrum are the lowest scores that automobile financers will accept for financing.
Consumers with credit scores in the 500 to 579 range will suffer from dramatically increased interest rates and intense credit scrutiny. Particularly in today’s economic climate, those with credit scores in this range have a good chance of being turned down for assistance from lenders.
Credit scores that are below 500 are in the most troubled range. Financing with a credit score in this range is nearly impossible. If lenders are even willing to conduct business with consumers with a sub-500 score, those consumers can expect their interest rates to be more than double what their counterparts with good credit can get. Credit scores in this range are a loud call to take action and begin the arduous task of rebuilding your credit.
What You Can Do About It
Recognizing a bad credit score and its effects allows you to take definitive action and begin to repair and build your credit. Fortunately, building a better credit score does not require you to take any magical steps, but merely requires you to invest a little time and to be diligent and have a new attitude towards your finances.
What a Great Credit Score Looks Like
Great credit scores start at around 720 and go up from there. Within this range is where you want your credit score ideally to be. If you have a great score, lenders will greet you with handshakes and pats on the back. Your interest rates will usually be very affordable and you will have the buying authority to make major purchases. In view of all this, your long-term goal should be to raise your credit score up to a level where it could be considered great.
How You Can Get There
To achieve a great credit score, you will first need to develop a financial plan. As you develop your plan, identify what behaviors or actions brought on your bad credit score. The next step is to change your spending and payment habits. Be focused and aware of the money you are spending and what you are spending it on. Keep making payments and make certain your payments are on time. Late payments can devastate credit scores. With time you can build a solid foundation and can enjoy the efforts of your work.