Bad credit is something that many people have heard of, but some may not know what it means. For a long time, there was no set way to find out what consumers did with their credit. But that all changed when a company called the Fair Isaac Corporation made the FICO score, which is a way to rate a person's credit. Because each of the three major credit agencies has different information about a person, the FICO score they come up with won't be the same.
Your FICO score is now the best way to tell if you have good credit or bad credit. To get your store, your credit report is compared to other people's credit reports. This information can help figure out how you will use credit in the future. Lenders will look at your FICO score when you ask for a loan to decide if they should give you money. Even if you have a low score, that doesn't mean you can't get a loan.
In the past, lenders wouldn't give you money if you had any marks on your credit report. They couldn't tell which people would pay back their loans. Since the FICO score was created, more people who have had credit problems in the past can now apply for loans. Mathematical models let lenders look at how borrowers behave to figure out who to lend money to. This information has been used by banks and credit card companies to make offers to people with different credit problems.
People with bad credit can usually still apply for loans, but the interest rates will be much higher. The score can be anywhere from 300 to 850. The better your score is, the closer it is to 850. Stats show that the average credit score for an American is around 677. You will need a score of at least 720 to qualify for loans with the best interest rates and features. There are a number of services that will charge you a fee to tell you your credit score.
There are a number of things that go into figuring out your score. Your payment history is the most important thing. About 35% of your score, which is almost half, is based on how you pay your bills. One of the main reasons people get bad credit is because they don't pay their bills on time. Your payment history shows how much you paid for bills like credit cards, loans, and other bills. Your score can drop a lot if you file for bankruptcy.
Your score will also depend on how much money you owe. When someone has too many loans and credit cards, their score goes down. Your credit score will go up if you have a long, good credit history. People with good credit are much more likely to get good loans from lenders. It's important to know how different things affect your credit score, because that could help you keep it high.
If your credit score is low, you need to start paying your bills on time. Get rid of some of your loans and credit cards if you have a lot of them. Your credit score will stay high as long as you take care of your credit in a responsible way. Lenders will be much more likely to give you loans with the best rates and terms. Even if you get turned down by one lender, it doesn't mean that all lenders will do the same. If you know how credit works and how to handle it, you can keep your money in good shape.
