Definition of Subprime Credit
Before anything else, let’s clear up what it means to have subprime credit. Southeast Michigan shoppers may not even know they have it until a loan officer examines their financial applications and notes the credit score.
Individuals with a FICO score or credit score between 580 and 669 are considered subprime credit holders. This status indicates the likelihood of a borrower paying back their loan on time and in full. Your credit history details how you’ve handled previous debts and can be used as a proverbial crystal ball.
When you carry a subprime credit score, you may face limited eligibility or higher interest rates when applying for loans. Although this does not necessarily mean that you cannot get a loan, it may mean it could take longer to procure one.
Reasons for Subprime Credit
Once you’ve gotten over the initial surprise, you may be wondering why you received this score. This can happen over a period of time, so let’s go over what may have led to this designation.
Any time you’ve missed a payment or sent it in late, this shows up on your credit history. This can add interest and extra fees to your initial loan. Your score may be affected by any excessive credit card debt and past delinquent accounts.
If you applied for not one but several credit cards, the points subtracted from your score add up. Your credit score can drop by five points with each inquiry.
Even when you’ve encountered hard times in your life due to a job loss, divorce, or medical issues, issues may arise that affect your score. Individuals who filed for bankruptcy, had a property foreclosed, or a car repossessed may see a change in their credit scores.
Ways to Improve Your Credit Score
You are not alone in having a less-than-stellar credit score, but that does not mean it has to be forever. Throughout your lifetime, your score can fluctuate. You can even control it with some sensible tips to follow.
Getting a copy of your credit history can enlighten you as to where your credit score dipped. It’s easy to order a copy, and by following the reasons listed in the previous paragraphs, you can track your history and see if there’s a pattern.
Once you’re aware of the blips on the credit radar, opt for change. Pay your bills on time and try your best to pay the minimum or more. By paying the most you can, you won’t be thwarted by late fees or higher interest accruing.
Make sure that the credit cards you have are absolutely necessary or useful. You may even want to get rid of cards you rarely use. Every time you apply for a new one, points fall off your score.