What’s your credit score? Is it Excellent, Good, Fair, or Bad? Is your credit score holding you back from home ownership, buying that new car, or even getting your dream job?
Although you wouldn’t think that it should, the definition of bad credit has actually changed over the course of the past decade or so. What was once considered a good credit score is possibly now only fair and those with fair credit scores might even have fallen into the bad credit range.
Here are a few things to know about your credit score:
Bad credit varies from lender to lender. For example, mortgage companies have very strict credit requirements while catalog cards have fairly lax requirements. Mortgage lenders may consider anything under 640 as a bad credit score, but credit card companies may offer credit cards to people with credit scores lower than 600. The interest rates may be substantially higher and there may be additional fees, but you can usually still get a credit card.
Generally a credit score below 500 is considered very bad credit and you may struggle to get any kind of credit if your score dips that low. The sad part is, it could only take one late payment, one medical bill sent to collection, or at the worst, bankruptcy, to knock your score down considerably. And it can take months and years to repair your credit after such an event.
During that time, you’ll likely pay nearly double the interest rate as compared to those with scores above 640. And this isn’t just your credit cards, it will also affect the interest rate on a new (or used) car, and potentially even your insurance rates.
Understanding how your credit score impacts your interest rates for loans and credit cards is an important step to rebuilding your credit.