Your credit score does affect the type of loans and financial products you’re eligible for. Having a low credit score may not keep you from getting that auto loan, but it could make the interest rate quite high. Even if you have poor credit, you could consider a cosigner in order to get approved for an auto loan.
So what is poor credit? Many lenders and financial institutions would consider any credit score between 300 and about 579 to be “bad credit.” Bad credit makes it difficult to be approved for certain types of loans, credit cards, or other financial products. And even if you can get approved, you may not get very good interest rates or terms.
This means that many people with less-than-perfect credit have to rely on specific types of loans if they need cash in a hurry. These loans usually include online payday loans, title loans, cash advances, pawnshop loans, and certain personal installment loans. But if you’re trying to get a traditional bank loan, credit card, credit union loan, or mortgage you may need fair, or even good credit to be approved.
A fair credit score falls between 580 and 669. In this range, you may be able to get approved for a better loan product, an auto loan, or other types of loans but the interest rates and terms still might not be very favorable. A good credit score would be 670 to 739. This is where you’ll start to see more approvals, and better rates and terms.
Very good and excellent credit scores will be between 740 and 850, with 850 being the highest credit score you can achieve with most scoring models. These scores are where you’ll find the prime interest rates and most favorable terms and conditions.
If you need to improve your credit score, there are several things you can do. The first step will be to pay off any outstanding debts you currently have. Decreasing your overall debt will boost your score over time. You can also lower your credit card usage. Having a lot of credit available to you, but only using a small amount will tell lenders you’re more financially secure.
Start with these tips and work hard. Eventually, your score will start to improve.