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Money Minute: Credit Scores and What They Mean When Getting an Ag Loan

Credit scores are an important part of getting any loan, and qualifying for an ag loan is no different. Take a quick look at the average U.S. credit scores and the minimum scores needed to qualify for an ag loan with the land lending specialists.

Credit Score Primer

A credit score is the result of an exact formula that takes a variety of financial factors into account: how much credit you have, how much of your available credit is in use, your history of paying back your loans, the length of time you’ve had loan accounts open and so on. The score lets lenders quickly determine how well you’ve handled your financial business in the last seven years.

Late or missed payments on credit cards, mortgages and loans will lower your credit score. Likewise, using a large percentage of your available credit will also lower your credit score. For instance, if you have a $1 million credit limit with all credit cards and lines of credit combined, and you have borrowed $800,000 of that credit, your credit utilization percentage of 80% looks like you aren’t handling your money as well as possible.

Conversely, credit card accounts, loans, and mortgages with a long history of on-time payments and a low credit utilization percentage will improve your credit score. Lenders are more likely to approve a loan if your credit score is high because such a score means you are more likely to pay off the loan in a timely manner.

History of Credit Score Values

Credit scores typically range from 350 to 800. For most lenders, any credit score under 620 is considered a ‘Bad’ credit score. It is difficult to get any type of loan with such a low score. Data shows that the majority of people in all age groups under 59 years have credit scores under 620, but the percentage is less as the age groups increase.

The next credit score level, 621 to 659, is considered a ‘Poor’ credit score. People with a poor credit score can usually find loans, but with really high interest rates. It’s a trade-off lenders insist upon to offset the risk they are taking by extending credit. Approximately 15 percent of all Americans have a poor credit score, except for those under 30 or those over 70.

A credit score from 660 to 719 is considered a ‘Fair’ or ‘Average’ credit score. They aren’t the most desirable for lenders, but they are still acceptable. Between 7 percent and 17 percent of Americans in all age groups have fair credit scores, with the percentage increasing as the age groups increase. The average credit score for all Americans in 2015 was 695. The average credit score has steadily risen since 2010, but it has always stayed within the “fair” category.

Credit scores 720 or higher are rated as ‘Excellent.’ These are the borrowers who get the best interest rates and the most attractive loan terms. Only 2 percent of people 30 and younger have an excellent credit score, but the number increases with each age group; 55 percent of those 70 and older have an excellent credit score.

Qualify for an AgAmerica Lending Ag Loan

Like most lenders, AgAmerica Lending sets a minimum credit score for many of its loan packages. For most, like the Farm & Ranch Land Loan Program and the Recreational Land Loan Program, the minimum credit score requirement is 680, which is a fair credit score, but still below the national average.

However, AgAmerica Lending stands apart as a provider of custom farm ag loans. Exceptions to the credit score minimums can be made on a case-by-case basis with our custom loan packages.

As the country’s premier land lenders, AgAmerica Lending’s loan teams work hard to help the nation’s agribusinesses grow and succeed with our low interest rates, long amortizations, and an outstanding 10-year line of credit.

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