Credit Rating Score Ranges and Common Myths Associated to it
A credit rating score is a way to establish the level of financial risk which an individual is a part of. It is a reflection of how well a person has organized his finances.
Lenders and other financial institutions like banks analyze credit rating scores in segments. The interest rates, terms, conditions and other factors correspond to these segments. A small description about each segment is listed below.
- Very Poor or Unworkable Segment (500 to 569)
- Poor Rating Segment (570 to 619)
- Average Score Segment (620 to 659)
- Above Average Segment (660 till 699)
- Healthy or a Good Score Segment (700-799)
- Desired or Excellent Score Segment (800 and above)
Scores from 500 to 619 are considered as poor scores. It is very difficult to get a loan if your credit rating score falls in this segment. However, chances are that if you manage to get past the 600 mark, you might get a loan with some ‘not so pleasant’ set of terms and conditions.
Credit rating scores from 620 to 659 are termed as average scores, while 660 till 699 is the segment considered above the average. Still, as a matter of fact, this segment falls below the cut off limit for attractive loan schemes.People with credit rating scores of anything above 700 find the gates of lenders and banks open for them.
As these are confusing at times, there are certain myths associated with these credit rating scores. Some myths are half true, but mostly credit report related myths are due to a generalization of facts. Some common myths are discussed below
Myth 1: All financial institutions use the same segment cut-off for providing loans.
Truth: No doubt, all financial institutions check your credit reports or scores before providing you a loan, but the terms and conditions along with the interest rates for the same credit rating score may be different for 2 different banks. Also, it is seen that personal loan systems can pop up many surprises with respect to handling credit score ratings.
Myth 2: People who have credit rating scores below 600 just cannot get loans.
Truth: No doubt, it becomes very difficult for a person with such a poor credit rating score to hear a yes form lenders, but it is possible that might get a loan with some tough interest rates.
Myth 3: Inquiries are dangerous for credit rating scores, so one’s personal inquiry can lead to a lower score.
Truth: Personal inquiries do not affect your credit rating score.
Myth 4: Credit agencies work as an automated system, so there are no chances of mistakes in credit report scores
Truth: Credit agencies take in date supplied by an individual while making a credit report, so incorrect data will result in a wrong report. Cases with incorrect credit reports and ratings are common.
Lastly, it can be concluded that getting a good credit report starts from understanding the basic concepts first; this also clears any misconceptions about the same.
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