For beginners in the credit world, credit score refers to the statistical number that lenders use to evaluate a consumer’s ability to pay for his or her expenses — in short, their creditworthiness. Credit scores are based on credit history, including the number of credit accounts open, levels of debt, and repayment history.
More often than not, a person’s credit score can range from 300 to 850, and the higher the credit score comparison, the higher the probability of a person getting approved for a new credit card or loan.
Credit Score Comparison
To properly evaluate a person’s credit score, lenders and financial institutions primarily use the credit score comparison model developed by the Fair Isaac Corporation or FICO. These credit score comparisons can greatly affect a person’s life. For instance, people with a credit score of 500 and below will have a difficult time in availing loans or securing a new apartment or a new car.
According to an article published in NerdWallet, there are different treatments for people depending on their credit score. People with a credit score of 640 and below are considered subprime borrowers, meaning financial institutions can charge them at a higher rate than a conventional mortgage.
This credit score comparison should not discourage people from applying for credit or loans. People who have a credit score that is below 500 are still qualified to get credit, but it will come with specific conditions. These conditions are different depending on the lending institution.
More Perks For Higher Credit Scores
Furthermore, as consumers continue to get credit, more points are added to their credit score, giving them access to more credit products.
Of course, all of this information can be overwhelming to beginners, but it pays to be informed. The most important thing to do when opening a credit account is to monitor credit scores along with the expenses and payment schedules. Remember, good payment history can boost the credit score.
Sometimes, accessing personal finance websites can contribute to the credit score. Be careful and make sure that the same credit score checker is used every time because otherwise, it will lead to confusion.
Keep Track of Your Credit Score Comparisons
Being mindful of the changes is important in keeping track of credit score comparisons because credit scores can fluctuate. The credit score can vary every time a person checks it depending on the conditions that can affect it. As long as the credit score is kept in a healthy range, this will have little to no impact on a person’s financial well-being.
In applying for loans, lending institutions not only look at credit score comparisons and credit profiles. Sometimes, a good credit score cannot secure loan approval. These institutions will look at the general credit history of a person and judge whether a consumer can pay the loan in the given schedule or not. In some cases, some people maintain a good credit score while swimming in debt.
Author: Jessica Ellen