Some of you are unsure what “bad credit” is. The reason that this is confusing to many is because the opinions vary. The opinion is different from different lenders. Typically, it is defined as a 620 FICO score. Fannie and Freddie and VA and USDA require 620 as a minimum. However, FHA can go as low as 500 if you have 10% equity in your home. You are likely to have very few options if your score really is that low.
If you think or aware that your credit score is low, it is important to realize what this means for you. Also, if you have a feeling that it is low, you should check to see what it is so you can start making adjustments to get that score higher.
Missing mortgage or credit card payments – especially chronically – is one clear indication that your credit score is likely low.
The lower your score, the more of a risk you are to borrowers. The risk being – if they let you borrow money from them, are you going to pay back what you owe? Creditors and lenders will charge you a higher interest rate since you are such a risk. About 39% of Americans fall in this category. So know, if you are here, you are not alone.
Also know, that there are ways you can increase your credit score. To start, begin to pay your loans back in a timely fashion. Pay down any debts you have as much as you can. You could also become an authorize user on a close family member’s credit card. Make sure this is someone who you know will pay back on time – it would need to be someone responsible and trustworthy. If you are already aware of why your credit score is low, work on fixing those areas. There are many other reasons you may have such a low score, as well, these are only a few.
Remember that “bad credit” is not the end of the world. There is a way out of it!