A person’s likelihood to repay a loan is a credit score. A good credit score range is usually around 700-800 signifying a low-risk borrower. It acts like an assurance that the loan will be paid on time.
With the advent of microloan facilities, life has become simpler and easier for many. The hassle of documentation and the never-ending procedure for loan approval used to be very cumbersome.
A credit score is a numerical range between 300 to 850. The higher the credit score, the more likely it is that a person would process on-time payments. You can owe debts on loans, mortgages, rent, household utilities, education fees, and credit cards. A credit score range will help determine your capacity to pay that debt.
Lenders may use credit scores to evaluate loan qualification, credit limit, and interest rate.
What is a good credit score range?
A credit score range above 700 is considered to be a good credit score range. If the range is above 800 then it may be considered an excellent credit score. Usually, creditors fall in the range of 600 and 750. As per a report, 714 was the average credit score in the US in the year 2021.
What does the credit score say about the borrower?
The credit score gives lenders an idea about the borrower. If your credit score is high, the creditor may be more confident in giving you the loan. They rest assured that you will pay debts and clear the outstanding amount in the agreed period.
If the credit score range is low then the creditor may doubt the borrower’s ability to repay the debt and may be hesitant to lend money.
There is a standard credit score range that everyone agrees to be good. But a creditor may define his own criteria for a good or bad score when they evaluate a consumer.
Who checks your credit score?
Anyone who is lending a loan, or giving out credit may check the credit score of the borrower before handing out the credit. It could be a bank, a micro-credit company, a financial firm, individual creditors, credit card companies, real estate agents, or simply anyone who is lending money in any form to the consumer.
This score gives them a rough idea of risks involved.
So it is imperative to have a good credit score to be able to get loans or credit from the lender.
How to achieve a Good Credit Score?
A lender looks for several factors to calculate your credit score. These inlcude factors such as past payment records, credit usage, length of credit history, etc.
For a good credit score you should have:
- A clear payment history, and making on-time payments help you score better and give you a good rapport.
- Your credit score is also affected by your credit usage, while calculating your score the number of accounts that you have and the balance that you have in your accounts are also considered. The portion of your credit limit that you are using also helps in calculating your credit score. For a good credit score, you should be using your credits within the limit and have sufficient balance in your account.
- If you’ve recently applied for or opened new accounts, this will also be considered while calculating your credit score. For a good credit score, make sure that you have kept a clean and prompt portfolio.
A good credit score is imperative for smooth and hassle-free loan processing.