Securing a loan can be a complicated task full of hidden pitfalls and unnecessary admin, however, your overall ability to secure a loan fundamentally boils down to one thing: your credit score. Every person has a credit score and, considering these facts, it is vitally important to understand just what it is.
The Basics of Credit Scores
A credit score is a three digit number that essentially represents a person’s history of timely repayments on credit accounts, with points being deducted from your score for late payments and points added to your score for timely and full repayments. With that being said, it’s somewhat obvious that a high credit score is preferable to a low one. It’s no exaggeration to say that your credit score ultimately plays a major role in the life you end up living, as a high credit score will result in both substantially lower interest rates and reduced deposits on future loans affording you increased financial agility.
What You Should Aim For
There are certain bands in the credit score spectrum within which each individual’s risk profile is ascertained. For example:
- A credit score below 605 will result in you being labelled as an extremely high-risk lender by most financial institutions which will, in all likelihood, see you either refused a loan outright or quoted a ludicrously high interest rate.
- A credit score of 667 or more will see you being classified as a minimum risk lender and quoted a reasonable interest rate.
- Between the credit scores of 605 and 667 lie various risk brackets, with your risk profile steadily improving as your score gets closer to the magical 667 figure.
Although a good credit score is important in a person’s everyday life, it’s not the end of the world if you don’t have a good one at the moment. For example, No Finance Cars offers a rent to buy program in which a poor credit score won’t deprive you of a car. So, if you’re struggling to secure finance, there are other ways to get what you want!