What Is A ‘Bad’ Credit Score?
Having bad credit is a sign to lenders that you have in some way not handled credit responsibly in the past. Those with bad credit histories end up with low credit scores. Typically, scores less than 600 are considered ‘poor,’ and those under 500 are considered ‘very poor.’
Credit scores are calculated using several factors. These include the number of accounts you have, how long you've held those accounts, payment history, available credit (or your credit utilization rate), the number of credit inquiries you've had in the last two years, and any reported collections accounts or bankruptcies. Together, all of these factors paint a picture of the level of risk to lenders who are considering offering you credit.
Low Credit Scores Mean Fewer Credit Offers
Generally speaking, consumers with ‘poor’ or ‘very poor’ credit will have difficulty getting accepted for credit. Some lenders are willing to take the risk, but the rates and terms are costly and may require down payments or some form of collateral from the borrower.
Conversely, those with higher credit scores are offered more competitive rates and are accepted far more often for credit applications. It is essential for anyone who wants access to credit to have a solid credit history when applying.
Bad Credit Does Not Have to Be Permanent
If you are struggling with a low credit score and a poor credit history, you are not alone! It is estimated that more than 25% of people have a credit score of less than 600. You can take steps to improve your credit score and improve your creditworthiness to future lenders.
When you increase your credit score, you increase your opportunities to open new credit accounts and explore new credit products. Lenders may also reward you for improved credit history with increased credit limits, lowered rates, or other product offers.
You Can Make Positive Changes to Your Credit Report
While it may be easier to wreak havoc to your credit than to fix it, it is not insurmountable! Getting your accounts current, working with lenders to make payments and lower interest rates, and not adding to your debt are all huge steps in the right direction. With the right commitment and attitude, you can turn a poor credit history around with time and consistency.
Additionally, you should be reviewing your credit report frequently to ensure all the information reported is accurate. According to a study conducted by the FTC, one in five Americans has an error on at least one of their credit reports. Since the information in these reports is used to calculate your score, a mistake or an error of any kind could be negatively impacting your score and ultimately costing you money.
It Is Ok To Ask For Help
If you're not sure how to review your report or if you do find an error and don't know what to do next, it may be best to speak to an experienced professional. There are many options when it comes to credit repair, and sometimes the thought of turning your credit around can be so difficult you do not know where to begin. That is why Credit Helpers are here to guide you! Our experienced team can assist you through the process of getting back on track, setting up a plan for credit repair, and meeting your credit score goals.