What Lenders Think About Your Credit Score Number

You’ve probably got a general idea of whether your credit is good or bad. But the numbers matter when it comes to credit. If you don’t know your credit score, you don’t know all that you need to know about your credit situation. Knowing what the number is doesn’t do too much to increase your credit awareness if you don’t also understand what the number means. You should know more than just “high” or “low”; you should know what a lender is going to think when your number pops up on application.

A lender will look at your credit score to determine how likely it is that you are going to pay back the money that you borrow. Ideally, you will have a credit score of 650 or higher. This score is considered good and will generally allow you to get most loans that you are applying to receive. Your score can be as high as 900; the closer it is to this number, the better your chances are of easily applying for a loan. Basically, a lender looks at a number this high and thinks, “this person is likely to pay me back so I’m happy to lend them the money at a fair rate”.

If your credit score is between 620 and 650, your credit is considered to be “average”. The average borrower is likely to pay the loan back but is also fairly likely to make some late payments or to have some problems paying every now and then. The lender is going to look at a number in this range and think, “I’m going to probably get my money back but it might be a headache sometimes”. Chances are that they lender is going to want to increase your interest rate or decrease your spending limit to reduce the hassles of lending money to you.

If you have a credit score below 620, your lender is going to look at it and think, “this is a risk”. There’s a good chance that, based on your previous borrowing history, you’re not going to pay the lender back. Or you might but it’s going to take some pulling of teeth. The lender may opt not to lend to you or may make the terms of the loan so disagreeable that you’ll opt to look elsewhere for the money that you need. By understanding what the lender is thinking about when looking at your credit score, you’re in a better position to negotiate the terms of your loan.

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This entry was posted on Sunday, December 23rd, 2007 at 10:39 am and is filed under Credit Score. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.