What is a credit score?
A credit score is based on your credit history through which it is decided how much credit you can lend. These scores are used by lenders, including banks providing mortgage loans, credit card companies, and even dealerships financing auto purchases to decide whether to lend you money or not. There are different types of credit score out of which FICO Score is most common.
What is a good credit score?
In a range of 300-850, a credit score of 700 or above is considered good. A higher score represents that you are a good borrower and will pay the agreed amount. It is easy to get a auto loan with low interest through good score. Not only getting loans good credit help you in getting utilities, employment, promotional opportunities and more.
Benefits of good credit score:
- Low-interest auto loan
- Ease of getting a auto loan
- Ease of getting mortgages loans
- Ease of getting insurance and car finance
How to maintain a good credit score:
- Don’t miss or late payments
- Don’t use your credit card too much
- Try to have a short credit history or not at all
- Try to have a few types of credit
What is a bad credit score?
A score below 580 is a bad credit score. A low credit score represents that you are a risky borrower and maybe you will pay the amount. If you are having bad credit score you will be having problems in getting a loan, credit card or auto finance and there are more chances that your application will be rejected. A bad credit score doesn’t mean lenders will not give you the amount they will but on higher interest.
Problems with bad credit score:
- Higher interest on auto loan
- Risk of rejection of loan application
- Difficulty in getting approved for home or mobile phone
- Difficulty in getting a small business loan
- Difficulty in getting long time loans
How to improve a bad credit score:
- Check your credit report and fix errors
- Pay your mobile bill on time
- Pay your credit card amount on time
- Pay your credit on time
- Set up reminders for utility bills
- Get a secured credit card
- Apply for short term loan that can be paid in a year
- Apply for a personal loan as they have low-interest than credit cards
- Keep your unused credit card accounts open
If you have no credit score or you are a college student and trying to get a loan. Check this:
How to get a auto loan with no credit
- Co-signer that will take responsibility of your loan
- Alternative credit data like cell phone bills or utility bills or rent payment
- Take loans from community banks and credit unions
- Give a good amount of down payment
Can I get a loan with low credit score?
Yes, you can but there is difficulty in getting loan and interest rates are high.