A consumer’s credit rating score can be the single biggest determining factor when it comes to whether or not they will be approved for credit. A credit rating score can also help lenders determine what kind of interest rate the consumer will pay. Usually, a higher credit score will translate into a lower interest rate as well as making it easier for the consumer to obtain financing. Understanding the credit rating scale can go a long way to helping the consumer obtain the loans they need and help them improve their personal credit score.
In the United States there are three major credit reporting agencies, each of which keeps a credit report on every consumer in the country. Credit reports may differ slightly from one agency to the next and these differences will be reflected in the credit scores reported by each agency. The credit agencies typically utilize a credit rating scale that runs from 300 all the way up to 850. Consumers who have a credit score at the lower end of the spectrum will usually have difficulty obtaining credit. This does not mean that they absolutely cannot finance a car or obtain a mortgage on a new home. It does, however, mean that they will probably be required to pay a premium interest rate and may have to do quite a bit of shopping around before they find a lender willing to take a risk on their more questionable credit history.
If consumers keep their credit score at around the 650 mark and above, then they will generally have little trouble obtaining the credit they need. When they want to buy a car, they will likely qualify for a lower interest rate or perhaps even an interest free loan. They will also be able to qualify for the lowest home mortgage rates and will probably even be able to obtain a larger principal loan amount.
The credit rating scale is used by potential lenders to determine how risky a consumer’s financial behavior is likely to be. Consumers with a higher score are considered to be more credit worthy and are thus subject to fewer restrictions. Consumers who have struggled with debt in the past will have a lower credit score. Anything below 600 is considered to be a higher risk for lenders and those consumers will typically have to accept less attractive credit terms until their situation improves.