When Is a Credit Score a "Bad" Credit Score?

bad credit score   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 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.  

What is a "good" credit score range?

  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.  

What is a "fair" credit score range?

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.  

What is a "bad" credit score range?

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.  

Best tips for improving your credit score fast

  bad credit score

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  In order to improve your 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 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.  
  • Pay Your Bills on Time - When lenders access your credit report, they are looking to see how reliable you are at paying your bills.  If you want to improve your score, start making every payment on time each month.  If you are behind on any bills, bring them current.
  • Use Experian Boost - This is a new product that will allow your on time utility and cell phone payments to count towards improving your score.  You just provide them with access to your bank accounts.
  • Pay down your debt and keep your balances low -  Like we mentioned above, your credit utilization ratio makes up a big portion of your score.  At random, the credit reporting agencies are taking your credit card balances and dividing that by your total available credit.  As an example, if you have $1,000 every month in credit card bills and your total available credit is $5,000, your utilization ratio is 20%.  As a baseline, lenders want to see your ratio at about 10% and no more than 30%.  If you want to help out your ratio, you can become an authorized credit card user on another person's account.  Just make sure they have good credit themselves.

A better credit score is around the corner

  Now that you know more about credit scores and what they mean, you may be looking for ways to repair your credit and boost your score. Working with a credit repair company can get your personal finance situation back on track.

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