When it comes to credit scores, there’s one authority figure that sets the standards. And that is the Fair Isaac Corporation or more commonly known as FICO. FICO is considered at the gold standard when it comes to analytics software, solutions, and services. Its bread and butter are using data to understand consumer behavior and how it can lead to the state of a country and the world’s economies. Such data starts with each individual’s credit score.

In the United States, the FICO credit score is the most used system to determine a person’s spending habits. Each score takes into account payment history, the total amount of individual owes or debt, the length of a person’s credit history, the mix of credit types, and new credit. So when we hear people say that they have “good credit” or “bad credit,” we can just look at the FICO system of scoring to understand.

According to FICO, a bad credit score ranges from 300 to 850. If we have a score in this range, we will have a hard time getting approved for loans, building our wealth, and even getting approved for rental applications. But even with a bad credit score, we can still get by in life and achieve big things such as buying homes or cars. Here’s how.

Buying a House

When we have a bad credit score, the most common misconception is that we won’t be able to buy a house. It doesn’t matter if we have a growing family and an insistent urge to settle down somewhere. We won’t be able to pay upfront for a house. And we won’t be able to get approved for a mortgage loan especially from mainstream and trustworthy financial institutions such as Wells Fargo or Bank of America. But this isn’t necessarily true. We can still buy a house. We just need to know what our options are.

One of our best options is getting a Federal Housing Association (FHA) loan. This type of loan is among the most common ways for first-time homebuyers to lock down a loan for a house. This is because even if we have a credit score as low as 580, we can still get an FHA loan for a house. And plus, we might even get a loan with a down payment as low as 3.5 percent or no down payment at all.


Buying a Car

Unlike a house, people can get by without a car. Yes, it’s a necessity. But millions of people around the world, whether they live in the suburbs, cities, or rural areas, don’t ever buy a car if they can’t afford it. So if people have a low credit score, then they are less inclined to try their best to get a car of their own. The truth, though, is that a car is a crucial part of everyday life even if we have bad credit. So we can still get our own car. Much like buying a house, we just need to explore our options.

After finding the right car that would fit our needs and still be well within our budget, we should try our luck with getting an auto loan. We can try reaching out to major banks. But if we feel that we won’t get an approved loan from them, then we can try our luck community banks and independent websites. They are known to have more flexibility when it comes to credit scores and approving loans such as an auto loan.

If we get rejected from an auto loan, it’s okay. It’s because we can use this opportunity to determine what we can do to improve our credit and secure an approval in the future.

Building Wealth for the Future

Because we have a bad credit score, it’s fair to assume that we have a lot of debts to pay for. And because instead of building up our savings or investing in assets, we are using whatever money we have to spare to pay off our debts. This is true for many people. But even if we are busy paying off our debts, this doesn’t mean that we can no longer build our wealth for the future. The truth is that all it takes is a good amount of budget management and discipline.

We can cut off our expenses from other things and use the newfound extra money for our savings. But we also need to be more disciplined about paying our debts. The worst thing that we can do about them is prolong them and risk getting higher interest rates.

Even with a bad credit score, we can still do a lot of things. For instance, we can invest in assets that can help secure our future. We just need to learn our options and be more mindful of our spending habits and budget planning.

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