What is Considered as a Bad Credit Score?

A credit score in the range of 300-550 is considered as a poor score or bad. If you have a credit score that falls in this range, you will need to take serious measures to improve it. Having a bad credit score will not make you eligible to avail a loan or get a credit card.

How Does a Bad Credit Score Impacts Your Credit Report?

A bad credit score impacts your credit report negatively by making you appear riskier to the lenders. This increases the chance of credit rejection and results in low borrowing limits, high interest rates, and few promotional offers, or rewards. While lenders assess credit differently, a higher credit score generally improves your approval of chances and access to better rates.

What are the Factors/Bad Practices that Lead to low Credit Score?

A bad credit report or score can reduce your chances of getting favourable loan offers. Common mistakes that lower credit scores are mentioned below: 

1. Missed or delayed payments signal unreliability and significantly harm your credit score. 

1. High credit utilisation such as using more than 30% of your available credit, suggests overdependence on credit and poor financial management. 

1. Failing to monitor your credit report may allow errors or discrepancies to go unnoticed, negatively affecting your score. 

1. Taking new loans or shifting debt to pay off existing bills indicates financial stress and concerns of lenders. 

1. Opening multiple unnecessary credit accounts increases the risk of missed payments and accumulated debt, lowering your credit score. 

Disadvantages of having a Bad Credit Score

1. Limited Access to Credit: Lender prefers credit scores more than 750, and a low or bad credit score restricts access to loans leading borrowers to look for alternative lenders with higher interest rates or low-credit-specific loans.

1. Higher Interest Rates: Even when approved, borrowers with low credit scores typically pay higher interest rates, as lenders view them as high-risk.

1. Loss of Exclusive Benefits: Poor credit can prevent access to premium credit card features such as cashback, special offers, and higher credit limits, which are usually reserved for borrowers with good credit.

1. Higher Insurance Premiums: As individuals with low credit scores are perceived to be less reliable in making timely payments, insurance providers may charge high premiums.

1. Limited credit card choices: A bad credit score indicates risk to the credit card company which results in access to secured credit cards mostly and in some cases, you may not be able to get considered for credit cards as well.

Measures to Improve your Credit Score

There are several measures that will help you improve your credit score:

1. Get your credit report from Bankbazaar.com.
2. Review and analyse your credit report. Make necessary changes and improvements.
3. Fix your late payments by paying your dues on a timely basis moving forward.
4. Pay off debts (if any) instead of transferring it to other accounts.
5. A good way to build a credit history is to get a secured credit card.
6. Increase the credit limit on your existing credit card.
7. Have a good mix of secured and unsecured loans.
8. Maintain a low credit utilisation ratio.

How Long Does It Take to Improve Your Credit Score?

There is no fixed timeline to improve a bad credit score, as it takes time and consistent effort, as it varies for each individual. However, working on your credit is worthwhile to access better financial offers. Tools such as CreditExpert can help by providing personalised tips and insights to guide you in building a stronger credit score.

A good credit score can help you secure lower interest rates on loans and credit cards.

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