Is my credit score very important when a bank is determining my loan?
YES, your credit score is very important in today’s tough credit market. Banks will use your credit score as a handy mechanism to assess how much risk is involved in providing a potential borrower a loan. The higher the score of the likely borrower the lesser is the risk opposed to that lender. A higher score will also determine your likelihood of obtaining the available rate and term. What we have seen is that most banks will decline a loan solely based off the credit history of that potential borrower.
An average score that lenders will consider favorable is 680 or higher. Every bank is different, however some can work with a 630 FICO score where others require 680 or higher. From our research the average American range is from 651 to 720 in following during these turbulent credit times.
Credit score will also flush way from time to time because your payment history determines your credit rating. If you do struggle to make your payments by the due dates then this will affect your credit standings and lower your score. For example: Someone with an average score, 700 plus, can increase their score with as much as 20 to 25 points by paying their bills on the correct time in a given month. Establishing or re-establishing a good repayment track record will help in strengthening your score.
Another item that can lower your score is having elevated debts and stretching your credit cards to their maximum limits. This may lower your credit score by as much as 70 to 80 points.
Although it is better to have a credit card account than not at all, you must still make timely repayments to raise your credit score. Someone who does not possess a credit card for instance has a tendency to be a higher risk than somebody who responsibly manages their credit cards on a month to month basis.
One thing to remember before applying for a large commercial loan is to pull your own credit report. By pulling your own credit report you can go through and check through the items we just covered in this short segment.
Remember: In today’s rough market, your credit score is King!