A bad credit score is something no one wants to suffer from. According to Lexington Law, about 12% of Americans are suffering from one. You probably already know that you're entitled to one free copy of your credit report every 12 months. But do you know how to interpret it, and do you know what your credit score means? Having poor credit can affect your ability to qualify for things like loans, apartment leases, jobs and more .
In this article, we explain the difference between a “good” "fair" and “bad” credit score and what you can do to improve yours.
There's not just one credit score but FICO and VantageScore are the two most widely-used credit scoring models. They both have a range from 300 to 850. While the higher end of the range is considered “good”, the lower end is considered “bad”.
Above 670 is considered good, while a “very good” one is above 740. If you have a score in this range, you probably don’t have to worry too much. If you want to be “exceptional”, you will be shooting for the 800 and 850.
580-669 is considered to be “fair”. With a “fair” credit score, you'll most likely be approved for most loan types. You may, however, have to pay a higher interest rate.
300-579 is considered to be “very poor”. If you have a “very poor” credit score, you shouldn’t beat yourself up. However, you should make a plan for how you can boost it. If not, you’ll have trouble finding most types of financing and qualifying for special mortgage programs like FHA loans.
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In order to improve your credit score, you need to know which factors affect it the most. The two most influential factors are payment history and your credit utilization ratio. Together, they make up about 70% of your credit score. Once you do start to make changes, you will need to be patient. You won't see changes right away since any changes you make need to be reported by your creditors.
Now that you know more about credit scores and what they mean, you may be looking for ways to repair your credit and earn a higher credit score. Working with a credit repair company can get you back on track.