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What’s a bad credit score?
A bad credit score typically falls between 300 and 600, but there are ways to improve it.
A bad credit score falls between 300 and 600, and about 7% of Americans fall under this range, according to Finder’s Consumer Confidence Index. A bad credit score can make it challenging to secure financing and better interest rates, but there are credit-building options to help you increase your score.
What’s a bad FICO score?
A FICO score between 300 and 579 is considered poor, and with a score this low lenders may see you as a high-risk borrower. Here’s how FICO ranks credit scores:
| Rating | Score |
|---|---|
| Poor | 300–579 |
| Fair | 580–669 |
| Good | 670–739 |
| Very good | 740–799 |
| Exceptional | 800+ |
What’s a bad VantageScore?
VantageScore’s 4.0 model considers a score between 300 and 600 as bad, or subprime. Here’s how it ranks credit scores:
| Rating | Score |
|---|---|
| Subprime | 300–600 |
| Near Prime | 601–660 |
| Prime | 661–780 |
| Superprime | 781–850 |
Disadvantages of a bad credit score
A bad credit score makes it harder to secure personal loans, business loans, home loans or car loans. You’ll also have a harder time qualifying for credit cards and other personal lines of credit.
Because bad credit is typically associated with increased risk among insurers and lenders, people with bad credit may pay more for car insurance and home insurance (depending on your home state) and higher interest rates for financing and get less favorable terms overall.
Though not always the case, some employers may even run a background check that covers your credit report. However, how much this comes into play during the hiring process depends on the employer.
How to fix a bad credit score
If you have a bad credit score and are worried about qualifying for a loan or missing out on favorable rates and terms, you have options to improve your credit score. Here are a few to begin with:
- Review your credit report. Grab a free credit report from major credit bureaus and look for any errors or signs of identity theft that may be harming your credit history.
- Negotiate and settle your debts. Take note of all the debts you owe creditors. Consider calling your creditors to see if you can negotiate down your balance or secure more favorable repayment terms.
- Pay your bills on time. Paying all your bills on time, especially to your creditors, can help move your score into a good credit score range. Payment history makes up 35% of your FICO credit score.
- Apply for a credit-building card. You may want to apply for credit-building cards to prove to creditors you can repay your debts. These cards don’t check your credit and are usually linked to your debit account balance, so you can’t spend more than you have.
- Avoid hard inquiries. Applying for new credit can mean a lender has to pull your credit report to analyze your credit history. This is considered a hard pull, which can ding your credit score anywhere from five to 10 points and impact it for up to 12 months.
- Don’t close old credit lines. The length of your credit history plays a role in your overall credit score. Keeping older lines of credit open, even if you barely use them, can positively impact your credit.
- Get expert help. Sometimes, you may not know what the best course of action is to improve your credit score. Many nonprofits, such as the NFCC (National Foundation for Credit Counseling), appoint certified financial counselors to help you craft a personalized financial plan.
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Bottom line
The first step to improving your bad credit score is knowing what range of credit you fall into. If you have bad credit, you aren’t alone. There are ways to build your credit. By following general credit-building guidelines and reaching out to the NFCC, your creditors and other resources, you can be on your way to achieving a better credit score.
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