As you start transacting with various banks, retailers and other financial institutions like lenders, you start building a financial history. Your credit history will be determined by the amount of money you’ve borrowed in your life and how much of it you’ve diligently paid back on time.
Credit providers use your credit score to determine whether you qualify for a loan and how much interest you should pay. A high score indicates a low risk borrower, while a low score means a high risk borrower. The following is a rough guide to the different credit scores.
◦ 767 – 999 (excellent)
◦ 681 – 766 (good)
◦ 614 – 680 (favourable)
◦ 583 – 613 (average)
◦ 527 – 582 (below average)
◦ 487 – 526 (unfavorable)
◦ 0 – 486 (poor)
A general rule to what the different credit scores mean: Below 580: Very High Risk
Anyone with a score below 580 will be viewed as a very high risk with a high likelihood of not honouring the debt. As such, many companies will not consider them at all. Those that do will probably require a substantial deposit or collateral. They’ll also be more in terms of interest as a result of the increased risk they’re accepting.
581 – 599: High Risk
This is a borderline area where lenders will tread very carefully as you’ll be seen as a high risk client. Finance and credit will be extremely difficult but not impossible and when granted, will likely come with conditions and high interest rates.
600 – 619: Average Risk
A score in this range is considered to be an average credit risk and you shouldn’t have much difficulty getting reasonable credit with fair interest rates. That’s if you don’t have any judgments or listings behind your name.
620 – 649: Low Risk
At this level, things are looking up and the institution will look very favourably at your application. They’ll want to do business with you as you’ve proved you’re a responsible user of credit and therefore pose a low risk to them. They’re likely to offer you an attractive deal and you’ll have a strong negotiating position.
650 Plus: Minimum Risk
With scores this high you’re in a great position to negotiate finance and you should qualify for preferential terms and interest rates. Companies want to lend money to people with a score over 750 and will go out of their way to get your business.