Creditworthiness is defined by lenders with the use of numerical and sometimes alphabetical credit scores.
Three major credit bureaus dominate in regard to credit reporting and it is data from those agencies that is usually referred to with credit scores. The credit data is placed into certain brackets in order to show a lender the potential risk of lending credit to a particular individual. These credit scores often range from 300 to 850 on a credit scoring model where the lower the number a person’s credit score is the higher risk they represent and visa versa.
A credit score level of 575, generally speaking from data of all above agencies, would imply a lower than average credit rating. Any score below 650 is considered above average risk and therefore with a score of 575 a persons application with certain lenders may be declined. Alternatively if the application was accepted, it would likely be with less favourable conditions and interest rates than those with a score over the 650 threshold. Exact conditions for credit terms are almost impossible to predict as credit scoring models are regarded as a secret by those that develop them. There is no public information, other than very general information, that dictates what data is used by an agency to determine what factors alter a credit score and to what degree.
With this in mind, when talking of a specific credit score such as a 575 level, it is useful to know what the score means in layman’s terms. A 575 credit score level means that the borrower is in a Subprime lending situation. People with below average credit scores such as this are seen as high risk propositions to lenders simply because more defaults are served on borrowers at these levels. Lost revenue from these clients means that a lender has to protect their investment by adding high fees and charges as well as a higher rate of interest.
It is easily achievable to worsen a credit rating once in the Subprime lender bracket. This is because Subprime credit on someone’s credit history can actually damage a credit rating itself. With lower credit ratings, this in turn attracts more Subprime credit agreements, the process of which ends in a vicious circle.
Credit can generally be obtained at all levels of credit scoring, however with a 575 credit rating, unfavourable terms should be expected when applying for credit.