Many of us aspire to have good credit scores because it is one of the most important factors when determining your creditworthiness. Your credit score is what influences the likelihood of a lender approving you for various forms of borrowing money and it contributes to the determination of interest rates, terms and more. When you apply for something like a credit card, lenders want to weigh the risk they would take if they loan you money. This is where they look at your credit score and credit report to see the history of your past as well as your current financial picture; it helps them evaluate and summarize the credit risk.
However, how do you know if you have a credit score that is good enough to get you a great interest rate with favorable terms? Well, many lenders will look at your FICO score, which will range from 300 to 850. With this score range, you want to have the highest number possible to get the best deals on lending. To get a general idea of the numbers that constitute a good score from a bad score, review the following:
- Excellent Credit = 750+
- Good Credit = 700-749
- Fair Credit = 650-699
- Poor Credit = 600-649
- Bad Credit = 300-599
While those scores are just general guidelines, every lender has their own classification of what a favorable credit score is. That means if you have a low credit score, you could still be approved for things like debt consolidation loans through Broadstar Financial Group.
What Affects Your Score?
There are many factors that affect your FICO score and it is broken down into five categories that are assigned a percentage. This percentage weighs the importance of each category and they include:
- New Credit: 10%
- Credit Mix: 10%
- Length of Credit History: 15%
- Accounts Owed: 30%
- Payment History: 35%
As you can see, payment history and accounts owed make up the majority of your FICO score and individuals who once had good scores can quickly see that number drop when they face a change in financial circumstances. A rise in debt may occur from pay cuts, job loss, medical problems, divorce or having to rely on a low, fixed income because they may turn to credit cards to make up the difference. Of course, this has a domino effect because the payments can become overwhelming and unmanageable, which in turn, affects the FICO score.
How To Fix It
When an individual ends up with a low FICO score and a high amount of credit card debt, they may be able to find a solution through a debt consolidation loan by contacting Broadstar Financial Group. This option can help alleviate the stress that comes from multiple credit card payments and staggering interest rates. Often, those who opt for a debt consolidation loan will get a single-digit interest rate by combining all of their credit card debt into a loan that has one easy-to-manage monthly payment. With that in mind, it will provide the individual with numerous benefits because they can get immediate payment relief and with time, they can work on improving their credit score.