Credit scores are a big part of our lives. Credit scores are what dictate what we can buy, what kind of homes we can get and what kind of cars we can buy. If we have good credit, it is easy to get these things, but if we have bad credit, we may find that it is harder than we imagined to get a home, car or credit card. With a poor credit score, interest rates can be very high. A high interest rate can lead to a difficulty making payments.
The sub-prime mortgage crisis was essentially created by lenders giving mortgages to people who did not have the credit for it. Their poor credit score meant the interest rates were very high, although the interest rates were low to begin with. Then the people could not afford both the mortgage payment and the interest payment that could reach 20 percent. They fell farther and farther behind, and that led them to be foreclosed on. The people that this happened to had poor credit generally, usually below 600. However, if you have an average credit score, where do you sit between 300 and 850?
For FICO, it sits at around 650. If your score is in that range, you will be able to get a loan or credit card without much trouble. You will deal with higher than normal interest rates though when compared with someone who has a credit score of 780. If your score is above 650, you will have little trouble with getting a loan, and the interest rates will be much lower than those who are below you credit-wise.
If you have a lower-than-average credit score, you will need to work to improve your FICO credit score through various means, including paying your bills, lowering your debt-to-income ratio, paying off your debt and more.
If you think your credit score is decent, you will probably go to see if you can get a loan. However, if you do this on a regular basis, creditors will see that you have asked for credit from a variety of sources and they label you as a compulsive borrower, which could hurt you in terms of getting a loan.
It is important to remember that just because you have average credit, it does not mean you should be happy with it. You should try and do everything you can to improve your credit by paying your bills on time and ensuring you do not owe too much on debts. Average may be good for everyone else, but is it good enough for you? Your credit is decent, but it could be better.
This is why it is important that you know your credit score. By knowing your credit score, you can find out how much you will be paying for an interest rate, and what your ability to pay back a loan will be like. Thankfully, you get one free credit report each year, so be sure to use that credit report so you can find out your credit score and see if you are average.
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