Credit Education

What Is a Bad Credit Score?

Generally, a bad credit score is anything below 600. Because it represents your creditworthiness, your score can affect your financial flexibility, and in turn, your lifestyle.

A low credit score can stand between you and your goals. You can get rejected outright — or get approved, but at a much higher interest rate than if your credit score were better. Luckily, your credit score is only a picture of your credit report at that moment and it can change.

Range of Credit Scores

Credit scores typically range from 300 to 850 based on the FICO® score . The higher your credit score is, the better. Each lender determines what it considers a good or bad credit score. Although variations exist, there are general guidelines to give you an idea.

The FICO® guidelines for a credit score range:

Excellent credit: 800+
Very good: 740 to 799
Good: 670 to 739
Fair: 580 to 669
Poor: 300 to 579

According to FICO®, the average American’s score is 704. However, 20 percent of Americans score under 600.

Although there is a difference between a fair credit score and a bad credit score, it’s important to note that many lenders will consider consumers with a score under 600 as credit risks.

What Causes a Bad Credit Score?

Reasons for a negative credit score come in many forms, including:

Overdue bill payments
Maxed out credit cards
Charge offs and collection accounts
Foreclosures
Identity theft
Excessive third-party inquiries

What is a Good Credit Score?

In short, a good credit score of 700 or more is perceived as good while above 800 is outstanding. Conversely, a score below 630 is considered poor. The majority of credit scores lie between 600 and 750.

The most common types of credit scores are VantageScore and FICO Score. They both use the 300 to 850 score range and analyze much of the same information. Your financial history, including your credit usage and recent inquiries, are gathered in order to generate your credit score.

Both VantageScore and FICO provide your base score, or their prediction of your ability to make debt payments based on your past tendencies. However, your FICO Score also calculates our industry-specific score. This number (ranging from 250 to 900) estimates how likely you are to pay a certain type of debt, including credit card debt and other loans.

What is a FICO Score

A FICO Score is a three-digit number based on the information in your credit reports. It helps lenders determine how likely you are to repay a loan. This, in turn, affects how much you can borrow, how many months you have to repay, and how much it will cost (the interest rate).

When you apply for credit, lenders need a fast and consistent way to decide whether or not to loan you money. In most cases, they'll look at your FICO Scores.

You can think of a FICO Score as a summary of your credit report. It measures how long you've had credit, how much credit you have, how much of your available credit is being used and if you've paid on time.

Not only does a FICO Score help lenders make smarter, quicker decisions about who they loan money to, it also helps people like you get fair and fast access to credit when you need it. Because FICO Scores are calculated based on your credit information, you have the ability to influence your score by paying bills on time, not carrying too much debt and making smart credit choices.

Thirty years ago, the Fair Isaac Corporation (FICO) debuted FICO Scores to provide an industry-standard for scoring creditworthiness that was fair to both lenders and consumers. Before the first FICO Score, there were many different scores, all with different ways of being calculated (some even including gender and political affiliation).

Raising Your Credit Score

Pay all of your bills on time, every time. This includes your utility bills, mortgage and auto payments, and all of your revolving lines of credit like credit cards. Check your credit report at least once a year. You can find out how to challenge bad information on your credit report here.

Never charge more than 30% of the available balance on any of your credit cards. Banks like to see a nice record of on-time payments, and several credit cards that are not maxed-out. If you are carrying high balances on your credit cards, then make paying them down below 30% a priority. Do use your credit cards – Many people who make mistakes with their credit believe that the best way to fix things is to never use credit again. If you are afraid that you cannot handle your credit cards correctly then the best policy is probably this one: Run only your utility bills on your credit cards each month, and then pay the balance in full by the due date. This ensures that your utility bills get paid on time automatically, and as long as you keep the habit of paying off your credit card balance each month your score will continue to go up. Leave the credit cards locked in a safe or drawer at home.

Keep your accounts open as long as possible – even if you are no longer charging on the card. The best policy is to keep those unused accounts open, blow the dust off your card every few months to make a small purchase, then pay it off. How long each of your accounts have been active is a major factor in your credit score.

Remember that this all takes time – Following the above steps consistently over a long period of time will increase your credit score and allow you to qualify for better loans and lower interest rates. Repairing your credit score does not happen overnight, so if you do these things for a few months and do not see a large increase in your score, do not give up. They are all habits that you will want to maintain throughout your life, as they will help you to keep your finances and lines of credit under control.

Disputing Negative Items

Show you a plan to maximize your debt ratio score, even if paying off credit cards is not an option.
Removing credit inquiries from your credit report. Most people are aware of the three credit reporting bureaus, Equifax, Experian and TransUnion. The average difference in scores between the highest and lowest of your credit scores, from the three bureaus, is 60 points. This is the result of the credit bureaus having different items on their report, which may be correct, incorrect or are not reported in full compliance with credit law. According to a recent study, nearly 80% of all credit reports have serious errors on them and this does not even include the even smaller errors for which we look.

If you cannot remove at least 25% of the negative credit items from all three of your credit reports, we will refund 100% of your fee.

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