Credit Score

credit cards

The scarlet letter of our time

You go into the leasing office of the Paradise Arms Apartments and find the home of your dreams. You fill out the application and imagine which couch would go best next to the window in your new living room. The office manager hands you a letter and the only word that jumps out at you is, “Denied”.

If this has ever happened to you then you know the heartache and embarrassment you feel. Like it or not credit rules our lives. It determines what you drive, where you live, what job you can get, and will someone other than mom loan you money. You can improve your credit score when you apply for loans bad credit and increase the chances to apply for another loan in the future, especially if you use it for an investment.

Good and bad credit difference

So what is the difference between good credit and bad credit? Good or bad credit is determined by two things, your actions and your history. For example, you finance a car and sign a contract that states you will make a payment of $174.28 every two weeks. When you make all your payments on time and in full, the finance company will report each on-time payment to the three credit bureaus. That will raise your credit score.

Now bad credit is when you do not make the payment of $174.28 on-time. So if it is late or you stop making payments altogether, that will lower your score. Also with the example of the car, when you stop making payments you are in danger of a repossession. One of those will really lower your credit score by remaining on your credit report for ten years. Multiples repossessions could prevent you from buying a quality car.

Basically, that is the difference, with good credit you will show positive actions and a positive history. With bad credit, you will show inaction and a negative history.

What does a credit score mean?

credit score Your credit score is tallied using the information on your credit report. The 3-digit number can range from 300-800 and above. This number tells a potential lender how risky it would be to do business with you. Generally, a person with a 725 FICO score is a better risk than someone with a 450 score. A better risk means that they are more likely to pay the loan back on time and in the full amount. Here is a list of the classifications:

300-629: Bad credit
630-689: Average credit
690-719: Good credit
720 and up: Excellent credit