What is a Good Credit Score?
Generally, a score between 670-739 is considered to be good, and a score that falls in the 580-669 range is fair. A score of 740 or above is very good, while a score that exceeds 800 is excellent. If your score is below 580, then you have a poor credit score and you pose a higher credit risk to lenders.
Keep in mind that the exact ranges can differ depending on the credit scoring model used, but these numbers can give you a general idea of where you fall on the spectrum.
The account activity, status, and history divulged in your credit reports is the basis for how your credit score is calculated, and those reports are compiled by the three major credit bureaus. Your payment behavior, account balance, and credit inquiries are examples of account activities that appear on your credit report and affect your overall score.
The two primary scoring models are FICO and VantageScore. Both scoring models are used to help lenders assess credit risk based on information provided in your credit report. By federal law, consumers are allowed to access their reports for free once per year through one of the major credit reporting agencies, which includes Experian, Equifax, and TransUnion.
What is Not a Guaranteed Benefit of Having a Good Credit Score?
While having a good credit score is important since it opens a lot of opportunities for you financially, there are certain financial benefits that your score cannot guarantee, including:
Financial Freedom
Although having a good or excellent credit score is often tied to financial stability, it doesn’t mean that you will have complete financial freedom. Financial freedom comes from having enough income to pay for your living expenses and having enough money left over to save, invest, and spend on non-necessities, like vacations and treats. If you have a decent credit score but you currently live paycheck to paycheck, you may not have enough money left over each month to comfortably save and invest the way you want to.
Lower Car Insurance Premiums
Actuarial research suggests that a high correlation exists between lower credit scores and the likelihood of filing a car insurance claim. In many states, auto insurance companies often grant lower premiums to individuals with clean driving records and higher credit scores. However, states like California and Michigan limit the influence of credit ratings on insurance premiums. Regardless of whether you live in a state that allows credit-based insurance premiums, however, factors that carry the most weight when determining your car insurance premium include your driving record, age, location, and the type of car you drive.
Having a decent credit rating does not guarantee that you will receive the lowest car insurance premium. If you drive certain luxury or sports vehicles, such as a BMW M4 or a Tesla Model S, you will likely pay a higher premium for auto insurance. If you have a lot of accidents and speeding tickets on your driving record, you can bet that your premium will skyrocket – even if you have a prime credit score.
Approval for Housing or Loans
When applying for new housing, a landlord or rental company will review your credit history to determine your likelihood of paying your rent. Similarly, when applying for a mortgage loan, your credit history will be a factor considered by lenders. As mentioned above, the lower your credit score, the higher your credit risk.
Even with good credit, you are not guaranteed approval for any type of loan. Lenders and landlords will also consider your income, debt-to-income ratio (DTI), and other key factors besides your credit history that go into determining your overall financial stability. If you have good credit, but you have a lower income and a significant amount of debt, you may not be approved for a rental property or a mortgage without a cosigner.
Prime Interest Rates
When securing a loan, your interest rate will depend on many factors, including:
- Type of Loan You Are Applying for
- Your State of Residence and Any Applicable Lending Laws
- The Length of the Loan Term
- Credit Risk
Your credit risk is a piece of the puzzle, but it’s not the only factor used by lenders to determine your interest rate. Essentially, having a lower credit risk and a higher credit score does not guarantee that you will receive prime interest rates when applying for a loan.
Your Credit Score isn’t the Only Factor That Matters
Your credit score affects many different aspects of your life, including your housing, the car you drive, and your ability to reach your financial goals. Financial goals are important for every individual, including those with good and bad credit scores. Whether your dream is to own a luxury vehicle, have an emergency fund with at least 3-6 months’ worth of expenses, or have enough money saved for a down payment on a home, a higher credit score opens the door to many different financial opportunities. If you’re stuck with a higher interest rate on your car loan or have higher insurance premiums due to your lower credit score, you may have less money to put aside to build your future. Additionally, without a strong credit score, it will be difficult for you to secure a prime interest rate for a loan, which means you will pay more in interest over the life of your loan.
However, your credit score is only one piece of your overall financial health. Your income, recurring expenses, debt, and your savings all tie into the big picture. When applying for a loan, a lender will often consider your credit history and income, along with your debt-to-income ratio.
As mentioned above, it’s possible to have a decent credit score and still live paycheck to paycheck with no savings because you’re stuck in debt. If you’re paying off your credit cards at the end of each month, but you’re eating ramen noodles for dinner every night because you’re short on cash, that scenario isn’t the epitome of having your finances together. It’s important to learn how to properly manage your income each month and build your savings account, so you can be prepared for a rainy day.
How Title Loans Can Help Borrowers Without Good Credit Scores
In the event that you’re not prepared for unexpected expenses and you have a poor credit score, a title loan can be a lifeline if you need emergency cash to get back on your feet. Title loans often cater to borrowers without strong credit histories because they are secured by collateral, so the application process is much more flexible than traditional bank loans. With a title loan, you are using your car’s title as collateral for emergency funding.1
Although your credit history is considered during the application process, it is not the only factor that matters to title lenders. For car title loans, your ability to repay the loan and the value of your vehicle will carry the most weight during your application. Keep in mind that you do not need to have a traditional 9-5 job to secure a title loan. Many title lenders will accept alternative forms of income, such as retirement or disability income, or worker’s compensation.1
If you’re interested in securing a loan against your car, call 855-422-7402 today or visit our FAQ page to learn more about ChoiceCash title loans.
