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In a perfect world, we would have the cash on hand to make any purchase we might need. For most of us, though, that isn’t a practical reality. Fortunately, loans can help us purchase big-ticket items like cars or RVs. Personal loans can also be used to consolidate debt, make home renovations or repairs, cover educational expenses, and more. Before financial institutions give you a loan, they typically check your credit history and credit score.
Having a lower credit score can make it more challenging to secure a loan. If you are concerned about your credit, you can check your credit history and take steps to improve your credit score. Here is more information on credit scores, what they are, and how to improve them.
Your credit score is a number that shows lenders your past credit history. Financial institutions typically check your credit score and credit history before approving you for a mortgage or other types of loans. Credit scores range from 300 to 850. A credit score of 700 or higher is generally considered to be a good credit score.
Experian, one of the three major credit bureaus, breaks down credit scores as follows:
740-799: Very good
300-579: Very Poor
Each lender has its own criteria for deciding who it will extend credit to and what their interest rate will be. Generally, the higher your credit score, the better your chances are of securing a loan at the lowest possible interest rate.
Your credit score is based on several factors. These include:
The first two items (your payment history and your use of credit) have the biggest impact on your credit score.
Your credit score is determined by using one of two models: FICO and VantageScore. FICO is the most popular option. Both of these options use information from your credit report to determine your credit score.
Your credit report is generated by three agencies: TransUnion, Experian, and Equifax. If you’re curious about what’s included in your credit report, or if you want to review it for possible errors, you are entitled to one free copy of your credit report each year from each agency. You can obtain that credit report by visiting annualcreditreport.com.
Since having a higher credit score can improve your chances of obtaining credit and help you get a lower interest rate, it’s important to do everything you can to boost your score. Some steps you can take include:
It takes time to improve your credit, but it can be done.
At Arthur State Bank, we believe in a modern approach to traditional banking. We have several consumer loans with competitive rates. If you’re curious about what you qualify for and which loan is best for you, contact us today. Our loan officers are ready to answer any questions you may have and connect you with the right loan product for your financial situation.