The Importance of a Credit Score
Life can considered one giant trail of paper. All official actions leave some sort of record. Most definitely, this is the case with financial transactions. Borrowing money, paying obligations, and engaging in various transactions are logged. In some cases, information is reported. A credit score collects all those reports and adds a numerical ranking to a person’s credit worthiness. Obviously, the better a person’s credit score, the higher the person’s credit worthiness. Those whose credit scores are weak are not exactly top prospects for traditional loans or decent interest rates.
So, what is a good credit score? There are a few ways to define “good”.
Credit Score Values: Good and Otherwise
There is an actual credit score range that is actually defined as “good”. Good credit is definitely better than fair or poor credit, but good credit alone does not open a tremendous number of doors for loan options and ultra-low interest rates. Anyone with good credit should work at the driving up the rating. A good score, honestly, might not be as good as some wish.
As for the actual credit score numerical rankings, they are as follows:
- Excellent: 750 & Beyond
- Good: 700 – 749
- Fair: 650 – 699
- Poor: 550 – 649
- Bad: 550 & Less
All in all, good credit is helpful to someone who wishes to reap the benefits of a decent score. Anything less than good does create certain obstacles, but the obstacles are not necessarily insurmountable.
Certain Drawbacks to Weak Credit
A credit score tells a potential lender just how much of a risk a borrower is. Good credit clearly makes someone a decent lending prospect, but questions to linger about why the person does not have excellent credit. Again, this is the reason why he/she would be required to pay higher interest on an unsecured personal loan or credit card. A person with good credit could get better rates with a secured loan.
When credit is poor or bad, traditional lenders are not likely to be interested. The borrower would need to turn to special high-risk lenders. Peer-to-peer lending would be one such borrowing source. Such private loan transactions come with rather high interest rates. For some, the high interest is acceptable given the need for a loan.
Other options for the poor credit borrower would be car title loans and payday loans. These might even be easier to acquire than peer-to-peer loans since they are, essentially, secured loans.
Rebuilding a Credit Score
One benefit to the higher interest rate credit cards is they assist with rebuilding a score. Repaying the loans on time ends up being logged on the credit report. Other steps may need to be taken to drive up the score. Anyone with high credit card balances is always going to see the lingering debt dragging down a score. With the right effort, even the worst credit score can be fixed.
A Noble Goal
Making attaining a good credit score a short-term goal would be a wise move. An excellent credit score is worth pursuing to be sure. Those who are not thrilled about their current credit score do need to do what is required to improve things. The efforts to do so much commence without delay.