A bad credit score is not just an indicator of poor financial health but also a reflection of how trustworthy and responsible a borrower is. Lenders usually look at this score to determine if a person is eligible for credit, the loan amount permitted and the rate of interest on borrowings.
A low score may put you on blacklist as a ‘credit risk holder’ and this will deny you a host of benefits like credit cards, loans, access to any form of credit, cash rewards on credit cards etc. You will also have to pay higher interest rates.
What is a Credit Score?
A credit score is a number usually ranging from 300 to 800 and is calculated based on personal financial data and spending behaviour. The higher the number, the better the credit score. An ideal/excellent credit score is anything from 700 and above. Any number ranging from 679 to 680 is a good score.
So what is a Bad Credit Score?
As a general norm, most lenders will not extend credit to those with a score less than 620. Scores that range from 500 to 579 are considered poor credit scores and scores that range from 300 to 499 are considered bad credit scores.
Below is a table that explains the breakdown of ranges for a bad credit score:
|Low credit score||580 to 619|
|Poor credit score||500 to 579|
|Bad credit score||300 to 499|
A bad credit score comes from not paying credit card bills on time, paying less than the monthly instalment, not paying loan EMIs on time, bad credit buying pattern, payment history, borrowing history etc. These factors will earn you negative points and jeopardise chances of a good and healthy financial future with access to easy credit at lower interest rates.
Even if credit is not denied to bad score holders, it will be much more expensive with higher interest rates. Insurance schemes and loans will get much pricier. There are, however, a number of measures that can be taken to improve credit score.
Here are a few :
- Keep your credit utilization ratio low and do not exceed the credit limit on your credit card.
- Keep your payment history clean and pay all bills on time, be it phone or utility.
- It pays to keep a regular watch on your spending behaviour and check your credit score regularly.
- Try to improve your credit score a few months before applying for any form of credit be it a car loan, personal or home loan etc
One cannot improve credit scores overnight. Good credit history takes a reasonable amount of time to build and it requires persistence. However, it is never too early to work on building the perfect credit score as this will benefit you in many ways in your financial future.
What Harms your Credit Score?
Trying to figure out why your Credit Score isn’t rising can be more puzzling than the rules of poker. We’ll give you 4 common reasons. But first, find out what your Credit Score is.
- You Live In The Highlands If your credit utilisation ratio is above 30 percent, your Credit Score may fall. Spend wisely!
- You Get Greedy Credit Cards and loans are meant to be handpicked and not bought in bulk. Space out your loan or Credit Card applications over a couple of months at least.
- Let Nothing Be Due Failing to pay your Credit Card dues and loan EMIs on time lowers your Credit Score. Keep reminders and never forget your repayment dates.
- Go Sherlock On Your Credit Report Check your Credit Score regularly. It might have errors. Get the mistake rectified at the earliest to get your score up.
Now that you know what affects your Credit Score, why not check it for yourself and see where you stand? We don’t charge a thing.
Everything you Need to Know about Bad Credit Score
Credit scores are one of the focal determinants in availing a loan or a credit card. Bad credit scores are a reflection of your past relationships with credit. Negligible behaviour with regard to repayment or using up too much of your credit limit, for instance, will negatively impact your credit score.
Your credit history is collected by credit agencies who analyse it and then equate it to a number between 300 and 900 that articulates how good of a customer you are to lenders. Late payments, defaulting loans and high credit utilization ratios are some of the reasons you may have bad credit. With bad credit scores, a lender will be less likely to approve a loan, and even if he does, he will most definitely charge you a high rate of interest. This is a mandatory hurdle you need to overcome to receive credit in future.
Hopefully, there is light at the end of the tunnel for people with terrible scores. You can increase your score over time by following the below steps.
- Request for your Credit Report from Bankbazaar.com
- Figure out what needs improvement
- Fix your late payments by paying your dues on a timely basis moving forward
- Clear up debts as quickly as possibly rather than transferring it to other accounts
- Get a secured credit card
- Raise your credit limit by either paying off some of your debts or getting additional credit
- Have a good mix of secured and unsecured loans
Remember, the journey to having a good credit score is a marathon and not a sprint. It takes time, discipline and knowledge to get there. Utilizing these tools to overcome this obstacle, will make you a creditworthy individual sooner than you think.
What is Good Score ?
A Credit Score of 750 and above is considered a good score. It’s not that you won’t get loans or Credit Cards with a lower score, but the terms might not be as favourable.
What’s The Benefit Of A Good Score?
A good Credit Score not only helps you get loans and Credit Cards easily, but may also help you get favourable terms like a low interest rate, long tenure, etc.
How Do I Get A Good Score?
Always pay your Credit Card bills and loan EMIs on time. A mix of secured and unsecured credit also goes towards building your Credit Score.
How Does It Help To Know My Score?
Checking your score regularly is a good financial practice. It’ll help you spot and rectify errors in your Credit Report that could hurt your score.It’s important to check your Credit Score, that’s why BankBazaar lets you check it for FREE.