What Credit Score Is Considered Bad?
Understanding what credit score is considered bad means understanding what a FICO score is and the ranges for FICO scores. Different kinds of loan or lines of credit require different credit scores. Taking out a small personal loan secured with collateral from your bank won’t require as high a credit score as getting a new mortgage on an expensive home. Whether or not your credit score is good or bad also depends on the person. I’m perfectly happy with my credit score of 700–I worked hard to improve it from a 535. You may be shooting for a credit score in the neighborhood of 800 or 825. There’s no such thing as a good or bad credit score, just different credit scores.
Having said that, no one wants a credit score of 300 (the lowest possible) and who wouldn’t like to have a perfect 850 credit score? Here is the range of possible credit scores and a little about how each score affects your personal finances.
FICO Score Ranges
FICO scores (FICO stands for Fair Isaac Credit Organization, the people who invented the credit score) range from a low of 300 to a high of 850. That means a FICO of 300 is like a 0 in school and a FICO of 850 would be like getting a 100 on a test.
FICO Score of 850 to 760
Any FICO score above 760 is considered an excellent FICO score. Consumers who have FICO scores of 760 and above are considered to be the least amount of risk for creditors and lenders. If your FICO score is 800, for instance, you’ll enjoy the best possible financial offers and loan terms. To get a FICO score this high, you have to have a near-perfect payment history and proven that you are worthy of credit by taking out loans and other products and paying them back. Only about 18% of Americans have a FICO score above 760.
FICO Score of 759 to 700
About a quarter of all Americans have a FICO score between 700 and 759. A credit score in this range is considered good, just one step below excellent. People whose FICO score is above 700 but below 760 hardly ever have trouble being approved for loans and may still get the best possible interest rates. Most consumers who score above 700 but below 760 on the FICO have a decent payment history and have taken out some credit, but may not have a long enough credit history to prove their ability to repay lines of credit.
FICO Score of 699 to 660
Consumers with FICO scores between 660 and 699 are rated as having fair credit. A credit score over 660 can still be called a good credit score, but it doesn’t qualify a person for the best possible interest rates. You may have a little trouble qualifying for some loan products. Expect to pay a slightly larger down payment on things like homes and cars. There’s nothing bad about a FICO score above 660.
FICO Score of 659 to 620
A FICO score between 620 and 659 is considered an average credit score, even though the majority of Americans have slightly higher FICO scores than 620. Many consumers have a FICO score somewhere between 620 and 659, and won’t get the best loan offers or be automatically approved for most loan products without some form of security. Though this isn’t yet a bad credit score, it needs improvement. People with FICO score in this range have some bumps on their credit.
FICO Score of 619 to 580
Now we’re getting into bad credit. Any FICO score below 620 can be called bad or poor. A FICO score below 620 means you have consistently missed payments to creditors or have even defaulted on debt. Often, people without much credit history at all find themselves in this range. If you have a FICO score below 620, you’re going to have to go out of your way to be approved for lines of credit.
FICO Score Below 580
If your FICO score is below 580, consider yourself a bad credit risk. If your FICO score is below 580, you’re going to have a lot of trouble taking out any kind of loan or line of credit. You won’t be able to get a credit card without a secured account attached to the card, and you can forget about any kind of financial product with an advantageous interest rate. At this level, you may even have trouble moving into a new apartment.
Bad Credit Score
A credit score below 620 is usually considered bad by creditors and lenders. Raising your FICO score to 650 or above will make a world of difference when it comes time to apply for jobs, apartments, lines of credit, or any kind of loan. If your credit score is below 620, creditors see you as a risk. They have no reason to think you’ll pay their debt back when you’ve had trouble paying it back in the past.
How Do Bad Credit Scores Happen?
Many reasons exist for bad credit scores–it may be that a person has never had a line of credit before. This is especially true of young people, like college students. When college students first apply for lines of credit, they’re shocked to learn that they have little or no credit at all. Building credit by taking out student loans and credit cards is a good idea, as long as the student can be responsible with those new sources of credit.
Your FICO score is important–it determines everything from what kind of job you get to the apartment you move into to the amount of interest you pay on your car note. Having a firm idea of your FICO score before you go after a new line of credit makes you an informed consumer and prevents any credit surprises.