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Why Credit Scores Reign Supreme in Today's Economic Climate

Credit scores are king now more than ever. Everyone from mortgage lenders to auto finance companies and even employers increasingly rely on these three-digit scores to determine who gets loan money and at what interest rate. A good score helps you get the best rates, while a bad credit score could keep you from buying that dream home or financing the new car you want.

Increasingly, even employers are looking at credit scores when they evaluate job applicants. Recent surveys show that employers consider credit scores when deciding which job applicants are right for their open positions. Many people do not like this, considering credit scores have nothing to do with how potential employees will perform on the job. However, the truth is that credit scores will continue to remain important for a long time.

How Credit Scores Work

It is critical for your financial well-being to understand how credit scores work and ways you can boost your score if yours is low.

In general, FICO credit scores – the most common type of score that lenders use – range between 300 to 850. The majority of consumers have credit scores that range from 600 to 799, with few at the top or bottom of the scale.

What the Scores Mean

A score of 720 or higher is generally needed for a mortgage, auto or personal loan that has the most interest rates. Scores in the 700 to 719 range are considered very good and generally bring low interest rates while scores of 675 to 699 are considered average. While average scores qualify for most loans higher interest rates offset some of the extra risk that lenders take.


Subprime borrowers have scores in the 620 to 674 range, and although they still qualify for most loans, the interest rates are higher. Of course, it’s better than having a credit score of 560-619, which is considered risky. Risky borrowers have trouble convincing lenders to give them a loan.

Those with scores under 560 have work to do. Few, if any, conventional lenders will pass out loan money to them.

The Importance of Credit Scores

For those looking to purchase a house, the credit score is especially important. If the score is in the 520 to 620 range, only specialized lenders (subprime lenders) will qualify the borrower. These lenders often excessive interest rates, but they do allow people to have access to the money needed for a mortgage.


Scores between 620 to 650 qualify for mortgage loans from most lenders but these lenders charge higher rates and fees because the default risk is higher. Those with scores of 650 to 720 will easily qualify for loans and usually pay reasonable interest rates.

Those with scores above 720 will not only qualify for all loan products, they’ll pay the least amount to borrow this money. Lenders consider them to be low credit risks. Because of this, they charge them low interest rates.

Two Steps to Boost Scores

If you want to boost your credit scores, take two main steps: Pay all your bills on time and reduce your revolving credit card debt. Doing these two things will slowly but steadily improved your credit scores. There is no way to boost your scores overnight; companies that say they can are lying. But with patience and perseverance, you can transform yourself from a credit risk to a safe bet in the eyes of lenders.

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