Based on a FICO® Score* with a score range of 300-850, a credit score of 669 and below is considered fair or very poor. Lenders sometimes refer to this group as "subprime". According to FICO, a little more than 37% of Americans have FICO® Scores in this score range.
A bad credit score can be compared with a bad grade in school, a failing grade on a driving test or getting bad results for any other type of assessment that uses a numerical ranking to judge performance. Getting the news that your credit scores might be less than stellar can be disheartening, but the good news is you are not stuck with your bad credit scores. Make improvements to a few key credit management habits, and over time, your score will improve.
In some respects, a bad credit score is a matter of perspective. Every lender sets their criteria for lending. Some credit card companies, for example, offer incentives such as travel rewards or cash back for those with high credit scores. Others offer products that are geared toward those with low credit scores, or those just beginning their credit life.
FICO® Score Ranges
|Credit Score||Rating||% of People||Impact|
|300-579||Very Poor||17%||Credit applicants may be required to pay a fee or deposit, and applicants with this rating may not be approved for credit at all.|
|580-669||Fair||20.2%||Applicants with scores in this range are considered to be subprime borrowers.|
|670-739||Good||21.5%||Only 8% of applicants in this score range are likely to become seriously delinquent in the future.|
|740-799||Very Good||18.2%||Applicants with scores here are likely to receive better than average rates from lenders.|
|800-850||Exceptional||19.9%||Applicants with scores in this range are at the top of the list for the best rates from lenders.|
See: What Is a Good Credit Score for more information on score ranges.
What Are the Factors of a Bad Credit Score?
There are many—in fact, hundreds—of credit scores that lenders use to help make lending decisions. But in almost all credit scores, the two factors that affect your credit scores the most are your payment history and credit utilization rate. There are other factors—such as length of credit (this is how long your accounts have been open). (See also: What Affects Your Credit Scores?)
How Does a Bad Credit Score Affect Your Finances?
Having a bad—or low—credit score can affect you by either not being able to get approved for credit, or if you can get approved, you may have to pay a higher Annual Percentage Rate (APR), higher fees, or other lending terms that are less than ideal.
In addition to banks, credit card companies, credit unions, and other types financial institutions, other types of companies use credit scores, including landlords, insurance companies, utility companies and cellular service providers. These companies often use credit scores to set deposit amounts when setting up service.
How Fast Can You Raise Your Credit Scores?
There is not a simple answer to this question since every person's situation is unique. But under most circumstances, if your scores are low but you start to take some positive action, you most likely won't see the results for two to three months. Usually, for the fastest results, you'll want to take these actions.
- Pay down debt. This decreases your credit utilization rate.
- Become an "authorized user" on another person's account. You will have to find a trusted partner for this as the account owner is responsible for paying the bill for this account.
- Get a secured credit card.
What Kind of a Credit Cards and Loans Can You Get With Bad Credit?
Depending on your score, most of the time you can get credit, it just won't have the best terms. Check in on the following:
- Secured Credit Card: A secured credit card requires you to deposit money into an account which is used as collateral for a credit card. Your credit limit is a percentage of the dollars you deposited. The benefit for you is that most secured cards report your payment history to the three national credit reporting agencies—Experian, Equifax and TransUnion. If you maintain a positive payment history, this account will help you build your credit history and improve your credit score.
- Short Term Loan: A a short-term loan is an unsecured loan that typically needs to be paid back in less than a year. Short-term personal loans are available in a variety of packages, and the devil is in the details with payment terms. Read agreements carefully.
- Personal Loan: A personal loan is an installment loan that typically has a lower interest rate than credit cards and can help you make a big purchase or it can be used to consolidate multiple credit card debts into a single, lower-cost monthly payment.
See also: How to Apply for a Credit Card
What NOT To Do If You Have a Bad Credit Score
Don't ignore your bad credit, thinking you won't need it sometime. Let's face it—living without a credit card can be challenging.
- Don't apply for multiple credit cards all at once. Too many inquiries can have a negative effect on your credit scores.
- Don't close accounts. The length of time you have an established credit account and the percentage of available credit you're using factor into your credit scores.
- Resist the pitches you get from companies that say they can improve your credit scores overnight for a fee. There is nothing these companies can do for you that you can't do for yourself.
Lastly, don't give up! Building your credit history and improving your credit score is possible and it is worth it. Having a good credit score will give you access to credit at the best terms to build a successful financial future.
To get started improving your scores, you can check your FICO® Score with Experian and learn which factors are affecting your credit scores the most.
Want to instantly increase your credit score? Experian Boost™ helps by giving you credit for the utility and mobile phone bills you're already paying. Until now, those payments did not positively impact your score.
This service is completely free and can boost your credit score fast by using your own positive payment history. It can also help those with poor or limited credit situations. Other services such as credit repair may cost you up to thousands and only help remove inaccuracies from your credit report.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on December 11, 2017, and has been updated.
*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.