Understanding Your Credit Score

Here's the scale on Credit Scores:

700 or above - This is EXCELLENT territory and will get you the best rates available. If you score in this range you're most likely not reading this article.

650-700 – This is a GOOD range and will still get you a great rate, however you may have to shop around a little to find it. (Be careful when shopping that every lender doesn't all pull your credit score, as each inquiry will have an effect on your score and may lower it.) Ask for the rate per credit score.  If they are reputable, they will tell you.  If they won't say what it is or say that they need to run your score first, move on as there are many other lenders available!

600-649 – This is the FAIR range and will get you an OK rate, but not the best, plan on spending 3 to 4 points higher than a conventional loan.

550-599 – No you’re in BAD territory and will have to pay a much higher rate (penalty) for falling in this category. You can expect double digit interest rates.  If you're here, you can still get a loan, but you need some serious work on building back your credit.

500-549 – UGLY – You have some major work to do, however don’t despair as you may be able to get a high interest rate, but you can refinance 6 month to a year down the road if you have clean credit from here on out.  Many “subprime” lenders will be bidding for your account as there is a huge increase in this arena.

On the other hand, it's best not to kid yourself about rates. Though rates vary somewhat depending on what part of the country you live in, you should expect to pay roughly 15 percent to 17 percent interest rates if your FICO score falls between 500 and 600.

While you may not have time to wait until you've dealt with your current credit issues, interest rates drop, of course, as you climb up the FICO rating scale.

If you do have a bit of time, you may want to check your report for some of the entries which have the worst effect on your FICO score.

For example, you may want to be sure that any closed accounts show as closed rather than delinquent. (You probably won't be surprised to hear that banks don't like to lend to people who are currently behind on their payments to other lenders.)