Having a bad credit score can affect your life in many ways. Specifically, your financial goals can become too difficult to accomplish when you’re known for having a bad credit history. Though a bad credit score does not automatically mean you have no chance to get approved for any loan, it can limit or delay some opportunities for you.
Lenders look at your credit score and consider it one of the most significant factors of your creditworthiness. In most cases, they will approve your loan with the condition of higher interest rates. As a result, you would need to pay more than you would if you had a better credit history.
Most finance companies you transact with might also look up your credit score because it will be their basis whether they should do business with you. Simply put, your credit score is an indication of your credibility as a borrower or debtor.
The question is, how can a lender tell if your credit score is good enough for them? Individual lenders may have their standards in evaluating a credit score, but most establishments generally recognize the usefulness of scoring models such as FICO and VantageScore.
FICO and VantageScore: Similarities and Differences
Both models use almost the same credit score range, ranging from 300 to 850. The higher your score, the greater your chance to enjoy more financial benefits. On the other hand, a credit score on the low end (600 or lower) would mean experiencing difficulties in qualifying for a loan.
FICO and VantageScore consider the same factors in giving a credit score. These factors include payment history, accounts’ age, account types, and credit utilization ratio. However, the two scoring models differ in the minimum scoring criteria. Receiving a credit score is easier with VantageScore, which does not pay too much attention to the age of a certain account. You only need to show one tradeline on your credit report. Meanwhile, FICO may have to require you to present one tradeline with activity in recent months.
Another distinction between the two is the credit score values. Excellent credit ratings for FICO and VantageScore range from 800 to 850 and 781 to 850, respectively. In contrast, very poor ratings range from 300 to 579 and 300 to 499.
What is a Bad Credit Score?
Considering both the credit score values of FICO and VantageScore, you should have at least a 700 credit score to get a good credit rating. Otherwise, you will have to pay higher interest rates, or worse, lenders may have to decline your loan application.
In some cases, lenders rely on their own company policies and guidelines depending on their risk tolerance when approving loans. Therefore, there is no specific score that implies a lousy credit rating. Some open-minded lenders may still give you a chance to take out loans by looking at other financial factors, such as your employment history. After all, a relatively low credit score is only one element of your overall financial picture and creditworthiness.
Final Thoughts: You Can Escape Bad Credit
If you find yourself amid credit troubles, you can work on improving your credit through a recovery plan. There are numerous ways to do so, and you can ask financial experts to help you along the journey.
First Finance Corporation offers personal loans for bad credit in Madison, TN. You can rebuild your credit, and we are here to help. We understand your needs, and that’s why we ensure that the process is quick and straightforward. For small personal loans in Madison, TN, we give people equal opportunities.
Finding companies with a less complicated process for small loans can be challenging. But we’re here to change that. Book a call today to learn more.