If you plan on applying for a personal loan in the future, the bank will likely check your credit score. This number provides an overview of your financial history, which enables banks and credit unions to determine the level of risk involved in lending to you.

Good vs. Bad Credit Scores

A good credit score can increase the chance of loan approval, but it can also improve the interest rates you’re privy to. Scores ranging from 850 to 800 are considered exceptional, and those falling within this range will be subject to the best interest rates. A credit score between 799 to 670 is favorable, which means that approval is likely and interest rates will be manageable. As scores drop below 669, approval is less likely, and interest rates will probably be higher to account for risk.

Factors That Determine a Score

Your bill payment history will be scrutinized, and late or missed payments will count against you. Your current debt will also be considered along with the length of your credit history. While bad credit is damaging, so is having no credit history at all. The type of credit you have is also taken into consideration, as lenders like to see a diverse range of credit cards, mortgages, and loans.

When Credit Scores Matter

Along with being approved for a personal loan, your credit score also comes into play in many other scenarios. If you want to refinance a student loan, lenders will look at your current score to decide whether to lower your interest rate. Credit scores are also considered when taking out a mortgage or renting a home, and some employers also perform a background check on applicants to determine their financial history.

If you have a good credit score and want to apply for a personal loan, contact the team at Hawaii County Employees Federal Credit Union in Hilo. They also offer banking services, including checking and savings accounts, credit line consolidations, and mortgage and car loans. There are no pre-payment penalties or hidden charges, so you can be confident that their terms are fair and reasonable. Call (808) 935-2969 to speak with a financial specialist about your needs, or visit the website to learn more about the personal loan process.