Often one wants to take a loan. There are always few parameters you have to fulfill to apply for loans. Since most of the loans include interests. It means that you have to repay more than the amount you borrowed. There are many factors to evaluate the capability of the borrower to return the loan with interest. These include the credit in banks, property for secured loans. That is how the lender determines the maximum amount of loan available based on your assets.
One very big parameter to analyze someone’s assets and capability to return money is called a credit score. It is a three-digit score based on your credit is usually in the bank. A typical range of this score is from 300 to 850. The higher the credit score implies more the capability to repay the bill.
There are mathematical ways to calculate credit scores. It is also found that there are a few different criteria to calculate credit scores. However, the results did not find to be significantly different. Usually, you provide the company with the details of your assets including the factor that how successfully you repaid the loan (if taken previously). After the information, they measure the scores using mathematical formulae, the output of the final formula giver your credit score.
There are big advantages of higher credit scores. A higher credit score implies that you can borrow more amount of money at a lower interest rate. As the higher credit score is a reliability factor on borrower so the lender feels comfortable at a lower interest rate because of higher credit score. On the other hand, you may not get a big amount of money as a loan, and even that with a higher interest rate because a lower credit score implies lesser trust in you.
What if the credit score is very low, it can reject a small amount of loan even if you agreed on paying high interest. It is because lenders can’t trust your payback capabilities. Let us describe credit scores more adequately with different levels of credit scores.
What Credit Score Is Good And Bad
- Excellent: 800 to 850
- Very Good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
The credit scores can have different levels the good, the bad, or the medium. The level of credit score highly evaluates your capability to pay back the loans and get more benefits at your bank. Following we discuss the criteria to understand the credit score
Excellent Credit Score
As mentioned before, the range of credit score lies between 350 to 800. We also know a higher score is better. Any credit score of more than 720 is considered to be excellent. This implies that not only the score is enough to prove your capability to repay the loans or bills, but also you are more reliable than most people. As 720 is much higher than the average score even for different age level groups. This is a great opportunity for you to utilize these scores to maximize your benefits and enhance your business.
Good Credit Score
Like the excellent credit score, there is a defined limit for a good credit score. These are defined by the owners of different money lending organizations. The range of credit score between 690 and 719 is a good credit score. Good credit scores may not be as valuable as excellent scores. However, there is nothing to worry about. You may get the same amount of loan as that of the excellent score with only 2 to 3 % higher interest rates. A good score of more than 700 is also way above the average credit score. Therefore, this has a very good impact on your capabilities and to get the better facilities at our bank.
Fair Credit Score
Fair lies somewhere between the good and the bad it is a boundary limit between a reliable and unreliable borrower. The range of scores between 630 to 689 is fair. Most of the average score lies in this range. Therefore, a fair range makes you reliable but not as much as the excellent. This implies that you can apply for loans and other benefits at a higher percentage of interest. But it is not that you are unreliable for the ender, However, a lender would be a little worried about your capability to pay back the amount of money you borrowed. With consistent efforts, you can prove yourself more reliable and achieve a good credit score, but you need patience and strictly work hard to complete your commitments.
Bad Credit Score
Any number below the 629 is a bad credit score. Make you less reliable in the eyes of lenders and getting a bigger amount of money will not be easy for you. Even if you get approval for a higher amount of loan you have to pay a much higher percentage of interest rate than the above three. It is because a bad score shows that previously you took some loan and find it difficult to pay back. That’s why to get back his paid money as early as possible, ender would impose a very high-interest rate. The bad score can only be improved if you successfully pay your current interests in time.
Another way to increase your pay score is to go for personal loans. The loan from another organization than your bank and then put this money in your current bank. This will increase your credit and hence credit score. Make sure to repay your loan interest on time. This will also increase your credit score. Once you are above the poor score the life will be easier for you. Another way is to apply for a secure loan while taking a personal loan will lower your interest rates.
The credit score is a very important parameter to evaluate your reliability to pay back the loans. The higher the credit score more benefits you can avail yourself. There are four main categories of credit scores excellent, good, fair, and poor. Being excellent or good can give you a lot of benefits including a higher amount of loan at a lower interest rate. The fair is also fine but bad scores can put you in a lot of trouble it means a lower amount of loan at a higher interest rate.