A credit score that’s not up to par may be an indicator that you don’t need to apply for a loan, according to a new study by a financial institution.
The new study, which was published in the Journal of Financial Planning, said that a score of about 350 points, or about a 10 percent improvement, could be indicative of a borrower who’s ready to apply.
The study analyzed the credit reports of 1,567 borrowers from four different states.
The analysis looked at how likely borrowers were to pay off their loans, their credit scores, and whether they had the means to make payments.
It was conducted in partnership with the Federal Reserve Bank of Atlanta.
The results were startling: About 15 percent of borrowers had a credit score below 350 points.
The rate was highest in California and the Northeast.
In the Northeast, a borrower with a credit rating of 500 points or higher was nearly three times more likely to have a loan default than a borrower of 350 points or less.
In California, the ratio was even more extreme.
In New York City, a credit-rating of 500 to 700 points was almost three times higher than a score below 300.
The ratio was also higher in California, with a rate of about 5.8 to 2.5 times higher in New York.
In Florida, a rating of 700 to 1,000 points was about three times as likely to default as a credit of 350 to 500 points.
In New York, it was about six times as high.
Overall, borrowers with a score between 350 and 600 points were more likely than those with a lower score to have their loans taken out by lenders, the study found.
The researchers estimated that about 17 percent of the borrowers had credit scores between 350 points and 600.
Borrowers with a higher credit score were more than twice as likely as borrowers with lower scores to have loans taken by lenders.
This was true even though the loan size was less.
The report also found that lenders with higher credit scores had higher interest rates.
Those with a larger credit score had higher loan payments and higher repayments than lenders with a smaller credit score.
The research, which relied on the National Credit Union Administration’s Credit Report and Monitoring Survey, is the first to examine how lenders respond to borrowers with credit scores above 350 points in a large-scale survey.
“In a national survey of over 400,000 borrowers, we found that borrowers with more than one credit score reported higher delinquencies than borrowers with less than one score, even after controlling for income, credit score, and age,” said the study’s lead author, Mark Greenberg, a senior research fellow at the Bank of New York Mellon.
“Credit scores above 500 are considered high risk for defaulting.”
The study found that those with higher scores tended to have higher default rates than those without a credit history.
“People with high credit scores were much more likely at all levels of their life to have high delinquencies,” Greenberg said.
“In other words, they had much more to worry about than people with lower credit scores.”
The new findings could impact the way people apply for mortgage loans, and borrowers in particular, Greenberg said in a news release.
“Lenders and their borrowers can’t afford to let high credit score borrowers get away with higher delinquency rates and defaults,” Greenberg added.
“They need to fix these problems before borrowers are pushed out of the market and into the foreclosure process.”
The National Association of Realtors, the trade group for lenders, called the study “a major advance in the field of credit scoring” in a statement.
The Association has previously found that credit scores of more than 700 are more predictive of creditworthiness than credit scores below 300, but Greenberg’s study shows that credit scoring at 400 to 500 is much more predictive than scores of between 350 to 600.
“It’s a new area of research and one that is going to continue to expand,” Greenberg told The Associated Press.
“But it’s a very exciting area of inquiry and one we’ve got to continue pursuing in a new way.”
The authors of the new study said that the credit scores provided by the credit reporting agencies should not be used as an indicator of credit worthiness or whether a borrower should apply for loans.
“The credit score is a great tool, but credit scores should not serve as a proxy for creditworthiness,” said study author Dr. Jeffrey L. Ragan, a professor at the University of Michigan.
“The credit scores have value only if you can demonstrate that you are prepared to pay the full amount of the loan, and if you have sufficient funds to make the payment.”
The report noted that the findings are “subject to at least some limitations.”
For example, the researchers noted that they did not control for income or other factors that might affect a borrower’s creditworthiness.
“If you don-t have enough to pay your loan, you may not qualify for the loan