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Consumers are becoming better educated as to what it means to have a credit score, but many people still are unsure what a particular number signifies. Credit scores in the United States may range between 300 and 850, with higher numbers being much more desirable than low ones. But how high is high enough, and when does a low number signal a truly bad credit risk?
The credit score range is actually very clearly defined. Stated broadly, consumers who possess a credit score of 650 or above generally represent the best credit risk. They have established a long credit history and have made paying on time a priority throughout that history. They utilize debt conservatively, making sure they do not get in over their heads and maintaining a healthy income to debt ratio. In general, people with a score of 650 or above will have an easier time obtaining credit cards or loans, will be able to borrow higher dollar amounts, and will receive more attractive interest rates for paying back these debts.
Consumers who have a credit score range that is below 620 will generally have a bit more difficulty obtaining further credit. Perhaps they have struggled to make payments in the past or have a high ratio of debt to income. They may have a delinquency on their credit history. Even if the delinquency is five years old and the consumer has practiced better debt habits since then, a potential creditor may see them as a bad credit risk. They may still be able to obtain a new credit card or car loan, but chances are good that they will pay a high interest rate and may be subject to other restrictions, like having a co-signer or having to make automatic payments mandatory.
With a credit score range that is 500 or below, consumers will find it difficult to obtain any kind of further credit or a loan. They may have multiple delinquencies and have an extensive history of getting in over their heads financially. Perhaps a car has been repossessed or bankruptcy has been declared. Consumers in this situation must begin to take positive financial steps to repair their credit. The judicious use of debt and making all payments on time will begin to repair this history. Time and consistency are major requirements, as it can take years of good financial habits to improve a credit score.