When you approach a bank for a loan, your application is thoroughly scrutinized and one of the first things they check out is your credit score. An indicator of your past financial karma, the credit score will largely influence the fate of your loan proposal and credit availability from financial institutions.
A lot depends on how your credit score is perceived by the banker or the financial institution, which is offering you a line of credit.
✧ Every loan that a bank or financial institution provides to any individual or business, comes with a certain degree of risk. They need an assurance that a loan applicant has the ability to repay his loan.
✧ This ability can only be gauged after studying his or her or the business's current financial status and past credit usage history. The history is provided in the form of the credit score rating, along with credit reports.
✧ The average credit score of any individual is a number that ranges between 300 and 850, and is calculated on the basis of credit usage history of the person according to the FICO algorithm.
✧ Credit bureaus are devoted to the task of analyzing the way in which credit lines have been used by the person in the past and calculate the credit score based on a statistical algorithm.
✧ As the credit score rating scale presented shows you, higher the credit score of the individual, higher are his or her chances of getting loans sanctioned by banks. You can check out your credit score from credit bureaus any time of the year.
Credit Score Rating Chart Explained
Here is the promised credit score scale presented. The highest credit score possible is of course 850, which is almost unattainable for anybody, but anything close to 850 will ensure that you are the apple of the bankers' eyes!
|750 - 850||Excellent|
|700 - 749||Great|
|650 - 699||Good|
|550 - 649||Average|
|300 - 549||Poor|
As the chart tells us, a score between 300 and 549 is considered to be a poor or bad credit score, while anything above 650 is a good credit score. If you ask me what is perceived to be an excellent credit score, know that it's anything above 750.
To maintain a good credit score, you need to maintain a clean financial record throughout. Defaulted credit card payments or missed loan installments immediately have an impact on your credit score.
If you take calculated risks and marshal your financial resources smartly, there is no reason why your credit score will not improve. All you need is vigilance when using credit lines. If you can control impulsive buying and prevent yourself from taking out credit lines with no repayment plans, your finances will automatically be well managed.
The fact that you have a bad credit score does not mean that it's the end of the road for you, as far as credit lines are considered. By managing your finances well and using your existing credit lines wisely, you can improve your credit score and earn your creditworthiness back again.