Credit Scores, Credit History, Credit Report
A credit score is a three-digit number ranging between 300 and 850. These numbers represent the consumer’s credibility while taking loans. Thus, the higher the number, the more trustworthy the consumer is. The scores below 630 are considered bad credit scores. Digits between 630 and 689 are considered fair credit. Credit scores are made up according to the credit history. The latter is a criterion of the borrower’s creditworthiness and ability to pay the debt back. Credit history is always registered in the consumer’s credit report.
Why is Credit History Noteworthy?
While making decisions, loan lenders, credit card companies commonly use the data recorded on the client’s credit history. To assess credit risks, the lenders use the information to calculate FICO scores-a credit score created by the Fair Isaac Corporation. The borrower’s activities, loan terms, patterns, and reimbursement system are revealed through credit history verification.
The Best Option to Build a Good Credit History
Paying the debts every month in full as agreed is essential to build a good credit score. Another must for maintaining a good credit history is keeping your credit card balance low. Besides, regularly checking your credit report is necessary to repair your credit scores immediately.
Bad Credit Scores Can Bring to…
- Loan rejections. If you want to take a loan for a car or a house with your bad credit scores, you may face refusals. You may need to try with a secured credit card and start building your credit.
- Higher interest rates. Even if you get a loan with bad credit scores, it will cost more than you intended it to be. You may pay more interest and be charged more fees.
- Small loan amount. Bad credit scores won’t allow you to take loans with large amounts.
Alternative Loans for Bad Credit Holders
Nowadays, bad credit loans are becoming more and more popular among those Americans who owe a lousy credit history. These short-term unsecured loans come with high-interest rates. Bad credit small loans ranging from $100 to $2500 help cover unexpected expenses like medical bills or emergency repairs. There are different lending sources for people with credit scores under 600. Here they are:
Not direct lenders. A vast number of lenders gathered in one platform offer loans to people with poor credit. These lenders are sometimes called “loan aggregators.”
Lenders that have flexible credit score requirements. These lenders do not have minimal score demands, while they consider several other factors, such as bank data, information from different credit bureaus, etc. Furthermore, these lenders even report the borrower’s payment history to three main credit bureaus.
P2P lenders. These lenders provide fixed-rate, limited-term loans and don’t require collateral. However, you will have to pay very high-interest rates if you take from peer-to-peer lenders.
Credit unions. These unions will offer loans if you make a down payment (deposit). They may even demand a co-signer and minimum credit scores.
Payday loans offer cash advances against the borrower’s next paycheck. They are considered high-cost and should be dealt with carefully.
Let’s Boost Credit Scores with New Credit Cards
One way to see improvement in your credit score is to rebuild it with a credit card. You can take either an unsecured credit card that does not offer rewards or credit cards mainly created for people with bad credit scores below 599. These cards will allow you to purchase anything you want or to pay your rentals. They will even report your history to three credit bureaus, thus enabling you to build a good credit history. However, such credit cards lack benefits and will cost more than traditional credit cards.
How to Repair Bad Credit Scores?
Those with bad credit scores should first realize the aspects affecting the quality of their credit history. People should take control over their financial health and take steps towards improving their credit scores. The first factor that may affect the class of your credit is inaccurate personal information. Whenever you find a fraud opened in your name, you should dispute the data by contacting the credit bureau, where you found the mistake.
Another factor affecting your scores is the high credit utilization ratio-a variable number that is changed as your balances and credit limits change. The credit utilization ratio is your credit card debt and shows how much your overall credit card limits you are using. The higher the credit utilization ratio, the lower your credit score is. Stopping spending too much on debt payments will decrease the credit utilization ratio and increase your credit scores.
The third essential factor is to avoid hard credit checks. When the lender checks your credit history, he evaluates your financial health. This can have a bad influence on your credit score. Thus, we highly recommend holding up applying for new loans for a while.
Have the Final Say!
Credit scores are essential indicators of your financial condition. Good credit scores always provide access to different types of loans and traditional credit cards owing benefits. Thus, following the steps mentioned above can alleviate the burden of bad credit scores making your credit history reliable and you a trustworthy borrower.