Every adult has likely heard the term ‘credit score’. It’s thrown around in discussions about financial responsibility, personal loans, and mortgages, amongst other things. However, what’s considerably less clear for many is how credit scores work and particularly – what is considered a poor credit score?
This blog post seeks to eradicate the fog of uncertainty surrounding this crucial financial detail and shed light on the nuances of your credit ratings.
A Crash Course In Credit Scores
Before we unravel the idea of a bad credit score, let’s highlight what a credit score is. A credit score is a three-digit figure that gauges your creditworthiness. In simpler terms, it gives lenders a snapshot of how you manage borrowed money. It’s largely based on your credit report data, and the score usually ranges from 300 to 850.
Breaking Down The Number Game
Credit scores have a range, and within that range, there are various ‘categories’. These categories can be – excellent, good, fair, and poor or bad. While there can be some variability among different scoring models, here is a rough breakdown:
- Excellent: 800 and higher
- Good: 740 to 799
- Fair: 670 to 739
- Lower end of fair: 580 to 669
- Poor: 579 and below
So, if your score falls below the 579 mark, it’s generally considered in the ‘bad’ or ‘poor’ category by most lenders.
The Impact Of A Poor Credit Score
Having a bad credit score can impact your financial well-being in multiple ways. Some common challenges include:
- Difficulty getting a loan or credit card.
- Facing higher interest rates on the credit you do qualify for.
- Difficulty getting approved for an apartment.
- Paying higher insurance premiums.
- Sometimes, difficulty getting certain jobs.
No Shortcuts, But There’s A Route To Improvement
Improving a poor credit score may not be an overnight feat, but it’s definitely doable with careful planning and persistence. Some key steps include paying your bills on time, keeping your credit utilization low, and avoiding new debt. Also, periodic check-ups of your credit report for mistakes can be beneficial, as errors can unfairly lower your score.
The Final Takeaway
When it comes to credit scores, what’s considered ‘bad’ is largely a matter of perspective and depends on the lender’s criteria. However, generally, a credit score below 579 tends to be viewed as ‘poor’ or ‘bad’.
A poor credit score can make it more challenging to secure loans or other forms of credit. But it’s important to remember that credit scores are not static – they can change over time, and with a little effort and financial discipline, you can strengthen your credit profile.
So, don’t fret if your credit score isn’t looking its best right now. Empower yourself with the knowledge in this post and use it as a stepping stone towards a stronger financial future!