If you’ve hit some financial potholes along the highway of life, your past mistakes may have taken a dent out of your credit score. It’s not exactly something you want displayed, front and center, but it is something that the average financial institution will see if they perform a credit check.
Even if your budget has long-since recovered from these blunders, your credit history may still show the evidence of your financial missteps. So what does it all mean?
Here are the facts about your bad credit score.
1. It Has the Range
According to FICO, the most widely used scoring model today, bad credit ranges between 300 and 669 on a scale of 300 to 850. About one in five Americans fall into this category.
2. You’ll Have Fewer Borrowing Options
Broadly speaking, consumers with excellent scores qualify for a greater selection of financial products than those consumers with poor credit.
That doesn’t mean you can’t borrow money online if you have a bad score. There are fast personal loans online with a quick request submission process designed for people like you. Other options are secured lending, such as the case with car title loans.
3. You May Pay Higher Fees
Your credit score is a representation of your creditworthiness, and your creditworthiness tells a store about the type of borrower you are; the higher your score is, the more likely you’ll pay your bills on time. The lower your score is, the more likely you’ll be late.
The latter is a bigger risk to financial institutions. If you’re able to qualify for a loan or line of credit despite having a low score, a financial institution may hedge its bets by raising your rates and fees.
4. It Affects More Than Just a Loan or Line of Credit
Financial institutions aren’t the only companies to check on your score. Landlords, employers, and auto insurance companies may also review your consumer file.
What they see in your report may affect their decision to take you on as a tenant, employee, or insured driver.
How they deal with a low score may vary, but the basics stay the same: an ultra-low score may be a hindrance if they check your report. You may find it harder to get a job or clinch affordable auto insurance premiums as a result.
5. It’s Not Permanent
Are your emotions in a tailspin after seeing the consequences of having a bad score? It’s a lot to take in, but don’t worry. Your bad score doesn’t hang around forever. Each bad entry only lasts seven to ten years on your report, after which it disappears from your history.
If you’re able to pack your history with positive entries from here on in, you may see a change in your score once your bad history gets deleted.
The thing is, your score is a dynamic number that’s adapting to how you use credit in real-time. If you build a long and varied history that proves you’re a responsible borrower, that’s what financial institutions will see once you put bad entries to bed.
Remember this if you’re worried your past mistakes hang around for longer than they’re welcome. Eventually, they won’t be able to haunt you any longer.