Do you know your credit score? Most people don’t. Even if you know your credit score, it can be very confusing about what is bad credit. To better understand what is considered bad credit, you need to first understand how credit scores are formulated.
You Have More Than One Credit Score
It is a common misconception that you only have one credit score. You actually have many credit scores, depending on how that score is calculated. Most banks use a FICO score, which is calculated based on credit reports from all three credit reporting agencies. However, credit unions and small private banks may have their own scoring system. Some lenders will go by a score calculated from just one credit report.
There is No Hard Rule About Bad Credit
To make matters even more confusing, not all lenders use the same markers for determining what is bad credit. Generally bad credit is a score lower than 630. Some credit scoring systems may consider bad credit 540 or below but have more tiers. You could be told you have good credit by one lender, and bad credit by another, depending on their scoring system and rules.
A Stab in the Dark Could Hurt Your Credit
Since you won’t know whether you are considered to have bad credit until the lender tells you, applying for credit can be a shot in the dark. It can be tempting to just keep applying for credit until you find someone willing to take a chance on you. But every time a lender runs a credit check on you it impacts your credit score. You will find that your credit score just continues to drop with every inquiry.
If you aren’t sure whether or not you have bad credit, chances are that you do. We can help by putting you in a used car today. Contact us for more information.