Why Fair Credit Score is so Important and Why you Should Care About it Now
Have you ever tried applying for a loan or mortgage, but you ended up being denied because your credit score is too low? It happens a lot and most people are having problems with their credit score.
Your credit score is a three-digit number that would determine your ability to pay your debts. The value ranges from 300 to 850. If you have a credit score of 690 and above, it means that you are doing great in paying your debts. If it is between 630 and 689, it is called a fair credit score.
If you have a fair credit score, you can still apply for loans and get approved like personal loans for fair credit. Getting a bigger loan with a fair credit score might be a bit difficult, but you can apply for a personal loan without a hitch.
Why do you have to care about your fair credit score and why do you have to improve it? Let’s talk about it.
Importance of Credit score
1. Low Interest Rate
Most people try to improve their credit scores as much as they can before applying for a bigger loan. It is because of the Interest rate. If you have a fair credit score, your interest rate is much bigger than those with a good credit score.
Once the interest rate is set, it will stay at the same all throughout so you need to improve your credit score before you decide to apply for any loan.
2. Better Chances of Approval for Loans and Credit Cards
Having a credit card is very convenient as you don’t have to bring cash with you. All you need to do is to swipe your card and you can pay for whatever you want to buy. However, applying for a credit card requires you to have a good credit score. People with a fair credit score can get a credit card, but you will have better chances if you have a good credit score.
The same goes for loans. If you have a fair credit score, the loan provider may not approve your application at all. By having a good credit score, your chances of getting approved for a loan will increase.
3. Better Negotiations
Did you actually think that the interest rate for a loan is already fixed once you apply for it? No. The lender has the power to decide on the interest rate of your loan. If you have a good credit score, you also have leverage when it comes to interest rates.
By having a good credit score, you can negotiate with your lender. Your credit score will say everything about your ability to pay. If you have a good credit score, it means that you are a good payer and you will always pay on time. Because of this, the lender will give you a better interest rate.
4. Approval for Bigger Loans
You have to remember that bigger loans will be impossible for people with a poor credit score. If you are applying for a mortgage or car loan, a fair credit score will not be enough to be approved.
A credit score of at least 690 and above have better chances of being approved for bigger loans. If you need money to start a business or you plan to have your car or house, you need to have a good credit score.
Having a fair credit score will still land you some loans, but the amount would be limited.
Think about your Credit Score Today
Having a fair credit score is great, but you should always strive for something better. If you want to have a good credit score, you have to start right now and there are a lot of things that you can do to improve it.
1. Pay your Bills on Time
If you’ve checked your credit score and it is pretty low, it means that you are probably not paying your bills on time. Start by paying them on or before the deadline so your credit score won’t be affected negatively.
2. Pay your Debt and Keep Your Credit Balances Low
A great way to improve your credit score is to pay off your debt as soon as possible. Any debt that you have would harm your credit score, especially if you don’t pay them on time or you have an outstanding balance.
If you always max out your credit cards, your credit score would be affected as well. It would reflect on your expenditures.
Having a fair credit score should always be your primary target if you’ve just entered adulthood. Try to keep up with the bills that you have to pay and manage your finances well as it would reflect on your credit score.
Don’t ignore this because many people made the same mistake. Ignoring your credit score will have a negative effect on your finances in the future, especially if you plan to start a business.