Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “What are the pros and cons of bankruptcy ?”
How bad does a credit score have to be to be bad?
The short answer is it depends, but let’s begin with the basics: What is credit? Credit, in short, is you. You don’t have any money, but you need it. So you go to someone who has money: a lender. You ask the lender for money, and in return, you promise to pay the money back, with interest. Interest means you will pay the lender a little extra when you repay the money loaned to you. This sweetens the deal for the lender and induces the lender to loan you money.
The lender you ask for a loan doesn’t know you, so how can the lender be sure you will repay the money? To answer this question, the lender turns to one of three (or all three) consumer credit reporting companies. These companies are called Equifax, Experian and TransUnion. They gather all kinds of information about ordinary (and extraordinary) Americans like you. They know whether you’ve paid your bills (or not), whether you’ve repaid loans (or not), whether your payments were on time or late, whether you’ve gone through bankruptcy and whether a house you own has ever been foreclosed upon.
After all that information is compiled, these companies—called credit bureaus—assign a number to you between 300 and 850, with 300 being the worst and 850 being the best. Someone with a score in the 700s has “good credit.” That means the person has a history of paying bills and repaying debts. The person is a good candidate for a loan. Lenders may be less inclined to give loans to people with bad credit because their credit history may show they have taken out loans and been unable to repay them.