Every credit report falls under a category depending upon the credit score on the report. Reports that have credit scores below 450 fall under bad credit zone. Being in bad credit zone has many disadvantages including higher interest rates, difficulties in obtaining loans including housing and auto loans and difficulties in applying for new credit cards. Reports having scores above 650 fall under good credit zone. Being ion good credit zone has its privileges, since it establishes credibility of a person. Money lenders and credit card companies offer low interests for people with good credit history, and it is easier to start a business, buy a house or deal with any transaction where large amounts of money is involved.
Reports that have scores ranging from 500 to 650 fall under a category called fair credit zone. While being in fair credit zone is not the worst case scenario, it does not qualify as best case scenario either. Being in fair credit zone is always better than being in a bad credit zone. But most privileges that are made available to people with good credit is not necessarily offered to people with fair credit.
People in a fair credit zone are always in a better position to improve their credit history, and increase their credit scores. Applying for new credit cards are relatively easier, but people with fair credit end up paying a higher interest rate than people in good credit zones. It is faster to escalate into good credit zone because mistakes made are usually minor and can be easily corrected in less than four billing cycles.
Obtaining loans are also not an issue for people with fair credit, but one thing of concern is the interest rates. Loan companies charge a higher interest rate for people with fair credit than those with good credit. This becomes an issue when the interest rates are fixed, and loan repayment period is long. There are good chances people paying higher interest rates, even after they improve their credit ratings.
Auto insurance is another concern for people with fair credit history. While they are still better than people in bad credit zone, they still pay higher auto insurance than people in good credit zone. Most of the companies are open for negotiation with customers who have improved their credit rating over a period of time. It is therefore important to improve the credit score and maintain a good credit history to avail the full benefits if the financial system.