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What is Poor Credit?

Your credit score can affect many aspects of your life. Whether you need a loan to buy a home or if you apply for a credit card, your credit score is used to assess your credit risk.

People with poor credit usually are in some sort of difficult financial situation. poor credit could also mean a low credit score. The definition of poor credit varies among lenders and financial institutions. Each has its own lending criteria and cut-off to determine whether a person has good or poor credit. Credit scores range from 300 to 850 and a FICO score less than 620 usually indicates poor credit.

 

A poor credit score can be thought of as one that either:

  • Prevents you from getting a loan or insurance, renting an apartment or even getting a job; or
  • Limits you to a loan with a very high interest rate and fees.

 

What lenders look at when determining if you have poor credit:

  • If you have a FICO score of 620 or lower
  • If you have two or more 30 day delinquencies in the past 12 months
  • If you have one 60 day delinquency in the past 24 months
  • If you had a foreclosure or charge off in the past 24 months
  • If you have had a bankruptcy in the last 5 years
  • If you have a debt-to-income ratio of 50% or higher

Poor Credit Loan or Bad Credit Loan

If you have a good credit history, you may qualify for a loan with good rates and terms. However, if you have a poor credit history, you may have to settle for a bad credit loan. Bad credit loans are loans that are made for people with a bad credit history. Bad credit loans are far more expensive than conventional loans. The interest rate is extremely high and the processing fees and closing costs are much higher than normal loans. Not every lender offers these loans. So you might have to look for lenders who are willing to offer these loans.

Qualifying for Loans

To qualify for a credit card you usually need a credit score of 660. With a lower credit score or even no credit, you might be eligible for what is often called "bad credit credit cards" but frequently these are either secured credit cards or prepaid credit cards. In today's economic climate, a FICO score of 620 is commonly the minimum credit score you must have to meet the criteria for a home loan. It is possible to be eligible for an auto loan with a poor credit score of 500, but it will be extremely costly.

If you are suffering from poor credit you should work on repairing your credit as soon as possible. Just remember to be patient. Your credit score will improve monthly as you make your monthly payments on time and remove past due amounts. One of the biggest advantages of repairing your bad credit is being able to get lower interest rates and loans. Having good credit means you have more options available. Lenders view you as less of a credit risk and are more willing to give you betters terms and rates.

Remember, you can always improve your credit score with the right tools and information. You do not have to suffer with bad credit your entire life. The Complete System to Repair Your Credit and Boost Your Credit Score will provide you all the tools required to help improve your credit. Download Today!