If you are using credit cards you know how important it is to maintain a good credit score. With every credit card swipe and borrowed credit loan, someone is keeping eye on your credit score. That someone is the credit bureaus. Your credit account history is collected by these companies and compiled into a credit report.
Whether your credit is good or bad, it is determined by your credit score. It is next to impossible to get auto financing for bad credit.
A credit score is given by credit rating agencies on the basis of money you have borrowed, your payment history, your income and lot of other factors. Credit scores generally range from 300 to 850. If you are running below 630 you fall under the bad credit category.
Here is the list of the score with respective credit category:
- 300-629: Bad credit
- 630-689: Fair credit
- 690-719: Good credit
- 720 and above: Excellent credit
Nowadays it is not difficult to end up with a bad credit. A series of late payment, loans defaults, filed bankruptcy, and negative information can lead you to the bad credit. According to a report 22%, Americans score under 600.
Effects of bad credit
Bad credit is not the right measure to judge your purchasing power. But it has a huge impact on how a bank or lender will see you as a customer. If you have a bad credit many banks will reject you outright. Your loan application will not get approved. Some car dealerships for bad credit might get your loan approved from banks or some lenders but the rate of interest charged by them would be really high.
Even insurance companies first look at your credit score before offering you their plans. Bad credit has the worse impact on your social life. If you are going to buy an electronic gadget you may need to deposit a security. Even a landlord demands high-security deposit if you have bad credit.
Bad credit is not a good situation for you. You end up with your social, personal and financial life messed up. You should avoid this situation but unfortunately, if you end up in this situation you must try to fix it.
You can click here to know more about effects of bad credit.