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What Is a Bad Credit Score? This Is What You Need to Know



About 53% of Americans, which account for more than half the population have been denied loans and rejected for credit cards due to a bad credit score.

( — September 16, 2020) — About 53% of Americans, which account for more than half the population have been denied loans and rejected for credit cards due to a bad credit score. Even more surprising is the fact that only 1% of Americans can boast of a perfect credit score. Question is, what is a bad credit score and why does it matter?

In many ways, your credit score is the gateway to financial security. It opens up opportunities for getting loans with low-interest rates, housing, and in some cases, employment. Your credit score could be the barrier between you, and the lifestyle you desire.

In this post, we’ll guide you through everything you need to know about bad credit scores, and what you can do to improve yours.

What Is a Bad Credit Score?

Bad credit refers to your history of failing to pay bills and the likelihood that you will not make timely payments in the future. Credit score ranges usually vary based on the scoring model used, like FICO and VantageScore or credit bureaus like Experian, and TransUnion.  Most lenders consider the FICO score, though.

Additionally, different card issuers and lenders have their own set guidelines that determine what constitutes a bad credit score. They base their decisions on the amount of risk they are willing to take. Some lenders cater to borrowers with a perfect score, while others specialize in lending to those with bad credit scores.

What Is a Bad Credit Score Number?

What is considered a bad credit score? The FICO credit score is any number between 300 and 850. It’s designed to indicate the level of consumer creditworthiness and their likelihood to pay debt on time. The higher your number is, the higher your creditworthiness is.

Scores from 300 to 579 are poor, and credit applicants may not get approved for loans easily. Scores from 580 to 669 are considered fair, and applicants are considered to be subprime borrowers.

Scores ranging from 670 to 739 are considered good and can easily get approved for most types of loans. Scores from 740 to 299 are very good, and loan applicants are likely to get better than average offers, and can easily qualify for most loans as well.

The exceptional credit scores run from 800 to 850, and these are the most creditworthy of the lot. Anyone in this category is going to get the best rates in the market, with no possible denial.

Vantage Scores are almost similar because they also range from 300 to 840. Anything from 300 to 499 is considered very poor, from 500 to 600 is poor, 601 to 660 is considered a fail, 661 to 780 is considered good, and 781 to 850 is considered excellent. About 61% of Americans have a fair VantageScore.

What Affects a Credit Score?

There are two major factors that affect a credit score, which are payment history and the credit utilization rate. The payment history accounts for 35% of the score and you need to make payments consistently to keep the score up. If you fail to pay on time and take too long to make the payment, your credit score suffers.

FICO also considers the amount of revolving credit you have. This is your credit utilization rate, and it accounts for 30% of your credit score. Beyond these two, the length of your credit history also affects your score, and so does your new credit, and credit mix. 

The length of your credit history accounts for 15% of your score, your new credit accounts for 10%, and your credit mix accounts for 10%.

How Does a Bad Credit Score Affect You?

A low credit score can affect your life in several ways. For starters, with a bad credit score, lenders will view you as a high-risk borrower and will charge you high-interest rates. If you need a mortgage, for instance, with a low credit score, you could end up paying thousands of dollars because of the high-interest rates.

It’s actually not easy to qualify for most loans, especially mortgages since it’s a substantial amount, and a great risk for the lender. Don’t be surprised if most lenders reject your mortgage application if you have bad credit. Beyond this, it may be difficult to get an approval for a cellphone contract or an apartment.

Some employers could also deny you employment, especially in jobs that require financial responsibility, and if you need to put up a business, qualifying for a small business loan won’t be easy either. Obtaining a conventions car loan may not be easy or impossible as well, and you might have to go for other expensive alternatives.

How Can You Improve Your Bad Credit?

Everyone’s situation is different, so you will have to do what will work for your situation. The best part is, even with a low credit score, once you start to make improvements, you can see results in as little as three months. Improving your credit score is relatively easy and you can start by checking your credit score online.

Once you know what your score is, start by paying all your bills on time. Set automatic payments or payment reminders so you can avoid late payments. Pay down all the revolving debts you have, like credit cards, which will decrease your credit utilization rate. If you can, get a secured credit card, get a short-term loan that you can pay back in a short time, or get a credit-builder loan.

What Is a Bad Credit Score? Everything You Need to Know

So, what is a bad credit score? It’s something you need to work on so you can have better financial opportunities. Having a bad credit score can pose certain problems with your personal finances, so it’s important for you to improve it as soon as you can. 

Now that you know everything you need to know about your bad credit score, you have to take the initiative to change it by taking the right steps.

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Bad Credit

Is There a Difference Between No Credit and Bad Credit?



The short answer is yes, and understanding the difference could be instrumental in getting better credit.

No credit and bad credit often get grouped together. It’s understandable why, as they both sound similar enough. And if you have either, the next step forward is to focus on improving your credit.

The two situations aren’t the same, though. It’s important to know the difference, because the right way to build your credit often depends on whether you have no credit history or bad credit.

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The difference between no credit and bad credit

Having no credit means that there’s not enough information on your credit file to calculate a credit score for you. It’s also known as being credit invisible. Sadly, this is an issue that affects millions of Americans.

There aren’t any problems on your credit file; the credit bureaus just don’t have enough data on you. That means when a lender or any other third party checks your credit, there’s nothing to go on.

Meanwhile, “bad credit” is a common term used to describe a low credit score. That low score is because of negative items on your credit file, such as not paying your credit card bill.

When you have no credit, the solution is to build your credit. When you have a low credit score, the solution is to rebuild your credit. Now, let’s look at how you can do each one.

How to build credit for the first time

Here’s the simplest way to build credit:

  • Open a credit card.
  • Use the credit card for at least one purchase per month.
  • Always pay your credit card bill on time and in full.

It’s that easy; that’s all you need to do to get a good credit score. When you use a credit card and pay the bill on time, you establish a positive payment history. That’s the biggest credit scoring criteria.

The tricky part when you have no credit is finding a credit card you can qualify for. Secured credit cards are one of the most common options for consumers in this situation. You pay a security deposit for this type of card, so it’s possible to open a secured card even if you have no credit.

If you’re in college, credit cards for students are available. These are often an option for applicants without any credit history.

How to rebuild a low credit score

It’s a little more complicated to rebuild your credit. First, you need to find out what negative items are affecting your credit score. Here’s how to start:

  • Use an online credit score tool to check your score and learn about any items damaging your credit. If you have a credit card, there may be a credit score tool in your online account. If not, there are plenty of free ways to get your credit score.
  • Request your credit report from the three consumer credit bureaus (Equifax, Experian, and TransUnion). You can pull a free annual credit report from each bureau, and through April 2022, you can get free weekly credit reports. Your credit report will show you exactly what’s affecting your credit.

Once you know what’s affecting your credit, you can work on correcting it. Below are a few of the most common issues and how to fix them.

Problems with your payment history

This includes anything related to not paying a bill on time, from late payments to having accounts go to collections.

The first step is catching up on your payments. If you can’t pay in full, contact your creditors and see if you can set up a payment plan with them. They may be willing to work with you if that means you’ll be making regular payments.

Next is rebuilding your payment history. The easiest option is to use a credit card at least once per month and pay in full by the due date. Why do you need to use a credit card? Credit card companies report on-time payments to the credit bureaus, which helps your credit score. With other types of bills, your on-time payments typically don’t get reported to the credit bureaus. That means you may not be able to improve your payment history with rent, utilities, or other monthly bills.

If you already have credit cards, you can continue using them to rebuild your payment history. If you don’t, look for secured credit cards and apply for one you like.

Using too much of your credit

A big factor in your credit score is your credit utilization ratio — your credit card balances divided by your credit limits. If this number gets too high, it can lower your credit score. The standard recommendation is a credit utilization ratio of under 30%.

Let’s say you have one credit card with a $4,000 balance and a $5,000 credit limit. That would put your credit utilization at 80% ($4,000 divided by $5,000 is 80%), a very high number that would decrease your credit score.

Fortunately, only your current credit utilization matters. Once you pay down your credit card balance, your credit score will bounce back.

Errors on your credit history

A low credit score may be due to an error and not any action on your part. This is why it’s so important to pull your credit reports from each credit bureau. By reviewing those, you can see if there are any mistakes.

If there are errors on your credit report, you can go to the credit bureau’s website to dispute them online and get them removed.

A low credit score and a nonexistent credit score are both things you can change. After you determine exactly what the issue is, you’ll be able to choose the best solution to fix it.

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‘There is no new normal’: Worcester small business owner pivoted during COVID-19 and expects only more change after pandemic



It took about eight minutes for the bank to reject Natalie Rodriguez’s application for a loan through the Small Business Administration.

Rodriguez opened Nuestra, a Puerto Rican inspired restaurant in Worcester, in January of 2020. When COVID-19 arrived months later she discovered Nuestra wasn’t eligible for the federal or state funding that thousands of other establishments received.

To qualify, restaurants were required to show payroll and salary for years before 2020. Those figures didn’t exist for a restaurant that weren’t open in 2019.

“[I was] determined and knew that ‘no’ is not an OK answer,” Rodriguez said. “A door may close but you may need to kick down another door.”

Rodriguez then applied for conventional loans only to be led to more closed doors. Less than 10 minutes after applying for an Economic Injury Disaster Loan, she received notice that her poor credit score resulted in her application being denied.

Rodriguez used the dead end with the SBA to create a new path for herself and Nuestra.

She not only learned how to improve her credit but wanted to ensure others didn’t have to follow her journey as an entrepreneur.

Rodriguez extended the “Nuestra” brand to include financial advising. She started Nuestra Financial in April of 2020.

“Now I’m helping others. I’ve been able to restore my credit,” Rodriguez said. “I’ve been able to help others restore their credit and be able to help them make a business themselves if they so choose. I’ve been able to survive.”

Without grants and other funding, Rodriguez managed to keep her restaurant open through funds generated from Nuestra Financial.

“I was very quiet about it in the beginning. I didn’t want people to be like, ‘Oh look at this girl, she just opened a restaurant in the middle of a pandemic,’ and talk smack,” Rodriguez said. “About a month or two later, a light bulb hit and I was like, nobody pays my bills but me. I needed to mind my own business and not worry about what other people thought.”

In creating Nuestra Financial, Rodriguez said she’s helped Worcester residents restore their credit and purchase new vehicles and homes.

Rodriguez said financial literacy is rarely taught to children in school and wasn’t something she learned. When a situation arises like a rejection notice for an economic disaster loan, many don’t know how to respond or where to find answers.

Rodriguez said she’s helped young and old people, along with those who have bad credit or no credit.

“We lack the confidence, including myself, because we weren’t taught,” Rodriguez said. “So if you don’t know something, you weren’t taught, you’re not going to be confident about it.”

Coming out of the pandemic, Rodriguez remains confident about both her businesses. Nuestra, the restaurant, while closed for daily service continues to provide catering services. Rodriguez is still preparing what the future holds for the restaurant but plans to announce an update soon.

As masks start to become less a part of daily routines, Rodriguez, as a small business owner, doesn’t envision many differences from this year to last.

So many aspects of life remain uncertain from rising food costs to a potential third booster for vaccines and whether the country will ever reach herd immunity for COVID-19.

The pandemic arrived with Rodriguez immediately pivoting. As it approaches its potential end, Rodriguez will continue to do what helped her to navigate it.

“I feel like there is no new normal just yet,” Rodriguez said. “I think we’re all just trying to adjust and pivot at the same time and getting creative. I think it’s where we all are.”

Related Content:

Owner of Worcester’s Nuestra restaurant, closing due to COVID impact, has something she’d like to say to Gov. Baker

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Columbus Mattress Wholesale moves to newer, larger Gahanna store



More than four years back, Cathryn Clark’s boyfriend, Christopher Robbins, was on the hunt for a new mattress. He just couldn’t find one at an affordable  price. 

Clark, 29, and Robbins, 34, who are now engaged, were living in Franklinton, where they still live today.

They had no experience owning or operating a small business; Robbins worked as a retail assistant for SAS Retail Services while Clark worked as the communications director for two Methodist churches. 

But in 2017, Robbins, with Clark at his side, took the leap and opened Columbus Mattress Wholesale on the West Side, with the goal of  helping low-income consumers secure mattresses and other bedtime products.  

“We really wanted to bring a store to people that, you know, they weren’t paying an arm and leg, but they still could get a good night’s sleep,” Clark said.

Customers at Columbus Mattress Wholesale can pay cash or credit, for example, but the business also works with financing companies that serve people without credit scores, with bad credit or who are lower income. 

Last month, the business made a big move. It expanded from its original location on Harrisburg Pike to a store double the size at 435 Agler Road in Gahanna.

Clark said she and Robbins saw a need in the broader area, with many of their customers coming from outside the Hilltop, such as Linden.

Nestled between Dollar Tree and the Ohio BMV in Gahanna, the new storefront opened Memorial Day weekend and sells mattresses, bed bases, bed frames and pillows. Mattress prices range from under $100 to more than $1,000, depending on the size and brand, which includes some well-known names such as Serta, Beautyrest and Casper.

Clark said while she and Robbins originally sold solely Ohio-based brands, they’ve branched out to national brands as business has grown.

Columbus Mattress Wholesale also offers free same-day delivery on most orders from customers living in Columbus. 

Clark does a little bit of everything for the business, from running communications, to working on the sales floor, to managing the sales team, to ordering what they sell. 

She said a big mission for herself and Robbins, beyond doing business, is aiding the community.

“We’ve seen a lot of people struggle,” Clark said.

Clark said she and Robbins work to mentor other people who are hoping to open or currently own a small business. She added that the store starts employees at $17 per hour.

She and Robbins haven’t decided yet what they will do with the original location — which is currently closed — but said they might shift it into an accessory store.

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