Most of your adult life will revolve around a single number that will affect your ability to make large purchases, get good credit cards, and get a home. Knowing what this number is and what affects it will help you get through many of these long processes a lot faster.
That number is your credit score.
Your credit score is an important thing to keep up with, and if you don’t have a good score, this will impact your abilities to get loans and eventually buy a house. So, what is a bad credit score and how can you make it better?
What is Your Credit Score?
Your credit score is a number that represents your credit history and is used to tell others of your trustworthiness to pay bills on time. This can include your loan history, car payments, house payments, and credit cards.
All of these items come together to form your credit score. If you have a high score, then you will have an easy time getting a loan or buying a home. However, if you have missed payments on numerous occasions or tend to live above your means by using credit cards, then you could be hurting your chances.
What is a Good Credit Score?
A good credit score is what loan officers, banks, and real estate agents are looking for. This tells them that you pay your bills and payments on time, don’t live above your means, and don’t have a bankruptcy on file. This will make it much easier to make large purchases that require a credit check.
But, when it comes to the actual number of your credit score, what is good or bad?
Well, the average credit score that is considered to be a mid-range point is between 400 and 600. This means that you might not have much credit history built up, or you have had a few missed payments. However, this could make it tougher to get financing for big purchases if it is below 600.
Anything below 400, you will have a difficult time getting any sort of loan without a cosigner. So, to do things on your own, you need to stay above 600 as much as possible.
What is a Bad Credit Score?
Now, when it comes to having bad credit, people know that sometimes this doesn’t adequately show how responsible that person is. With a few bad investments or a string of legal fees from a divorce, you could end up hurting your score by hundreds of points, even if you had great credit better.
So, this does not mean that a credit score under 400 won’t do you any good, but it will make things difficult for you. Anyone with a bad credit score is seen as a financial risk whenever money is given to them. Whether this is through a credit card or loan, the other person might think that you have a lower chance of paying the amount back in full.
So, if they see you as a high risk, they likely won’t give you anything. So, having a good credit score can help open some doors for you when you want to get a home, buy a large item, or rent a new apartment.
Credit reporting services give your credit history to those who do a credit check. If this check shows that you have some outstanding payments that you haven’t been paying monthly as you should, this will impact how financial institutions feel about you and what they will be able to offer you.
Ways to Boost Credit Score
If you don’t have the best credit right now, don’t worry. There are some things that you can do to help boost that number.
First, any debt that you currently have should have a schedule for paying it off. You need to decide how much each month you will pay, and how long it will take you to pay the amount off. All payments will boost your score a little, so this will help you.
Second, you want to limit your credit spending. You want to only use around 30-35% of your total credit amount. This will ensure that you live within your means and are not spending money on frivolous items you can’t afford.
Having a bad credit score is a bit disheartening, especially if some of your debt comes from the mistakes you made when you were younger. But, this doesn’t mean you can’t come back from it. Just start making a plan to boost your score little by little. You will be able to see your progress and make better financial decisions in the future.
So, don’t get discouraged if you have a bad credit score right now. It can change. Get started on taking care of your debt and make sure you pay every payment, and you will get right back on track.