What Is a Fair Credit Score? You may start to be concerned about your credit score when you have to apply for financing, such as a credit card or auto loan.
After all, your credit scores are what lenders and credit card issuers use to decide whether to accept you and, if they do, what kind of interest rate to charge you.
Think you have fair credit?
Read on to learn what “fair credit” means and how you can start to improve it so that you can get better rates and terms on loans.
What is considered a fair credit score?
FICO is the most popular credit scoring model in the country. It uses a range of scores from 300 to 850 to figure out people’s credit scores. The fair credit score range, according to the FICO credit score methodology, is between 580 and 669.
FICO Credit Score Ranges
- 300–579: Poor
- 580–669: Fair
- 670–739: Good
- 740–799: Very Good
- 800–850: Exceptional
You can check your FICO scores in a few different ways. First, find out if you can get a free FICO score from your bank or credit card. Members of several financial institutions can use this complimentary service.
You can get your credit score straight from FICO if you don’t already have one for free. Free internet credit scores are another resource you can utilize but keep in mind that because they are derived from different algorithms, they usually differ from the actual FICO score.
What characteristics define someone with a fair credit score?
There are no published criteria defining what constitutes a fair credit score, but experts have determined that this type of consumer has the following characteristics:
- One credit card or loan
- No more than $5,000 in credit lines
- No more than one 60-day late payment in the last 12 months
So, what does this mean for borrowers with fair credit?
You must have your 60+ day delinquencies removed or your account aged beyond 12 months in order to raise your fair credit scores to the “good” credit score category.
Additionally, you’ll usually need about three years of credit history to raise your credit score. When your credit score reaches 670, you are in the good range and will have access to higher credit opportunities.
Are credit scores average and fair the same?
The FICO score range for the average American credit score is up to 700. They clearly don’t mean the same thing because that is more than thirty points above the upper bound of “fair.” The lowest possible credit score is typically regarded as awful, followed by fair, good, very good, and exceptional. So, the majority of Americans have good credit.
Beyond just interest rates on financial items, your credit can have an impact on a wide range of aspects of your life. During the employment application process, certain employers could ask to view your credit report.
When you are looking to rent a new home or apartment, potential landlords may also do the same. Having credit that is below average might also result in higher insurance prices.
It is important to know how to build and keep credit, no matter where you are on the spectrum.
Fair Credit vs. Poor Credit
Any credit score below 580 is considered poor. Although having excellent credit is preferred, knowing the distinctions between fair and bad credit can assist consumers in making more informed financial decisions.
Even with fair credit, getting a loan or credit line might be challenging. In order to obtain a loan, borrowers with fair credit may need to produce additional collateral or a cosigner, or they may be offered higher interest rates and fees. However, because lenders may view customers with bad credit as too dangerous, they may find it impossible to get a loan at all.
To keep fair credit or prevent bad credit, it’s critical to comprehend how credit ratings are calculated. The two most important variables are credit use and payment history.
Maintaining or raising credit scores can be achieved by making on-time bill payments and minimizing debt. A credit score can also be impacted by additional variables like recent inquiries, credit mix, and length of credit history.
Bad credit can have detrimental effects. Poor credit might result in loan denials, higher interest rates, or larger deposits required for utilities or rent. Due to the possibility that it indicates a person’s lack of financial responsibility, bad credit might also raise red flags for prospective employers.
Knowing the differences between fair and bad credit is crucial because it can significantly affect someone’s financial stability. Borrowers can increase their chances of getting a loan or other financial assistance by learning how credit ratings are determined and taking action to preserve excellent credit.
Fair Credit vs. Good Credit
A person with a higher credit score finds it simpler to obtain a loan from a lender. Credit scores range from 580 to 669 for those with acceptable credit and from 670 to 739 for people with good credit.
Certain loans and credit cards can still be granted to people with fair credit, but the conditions will probably be worse than for those with excellent credit. They might have to pay more in fees, interest, and other expenses. In order to obtain a loan, they could additionally need collateral or a co-signer.
When it comes to borrowing money, people with good credit typically have more options. They might be eligible for reduced fees and interest rates, and they might not require collateral or a co-signer. Additionally, they can be eligible for rewards schemes and exclusive deals.
People with fair credit can raise their credit score by taking action. This includes avoiding taking out too many loans, paying off debt, maintaining modest credit card balances, and making all of your payments on time. These actions can help raise a person’s credit score over time, making them eligible for better deals and conditions in the future.
It’s critical to comprehend the distinctions between good and fair credit and to take action to raise your credit score. Fair credit is not always a terrible thing, nor does it have to be the only situation you have. By working hard and being patient, a person can raise their credit score, which will eventually lead to better terms and more alternatives for loans.
How can you improve your credit from fair to excellent?
To start improving your fair credit ratings further, there are a few things you can do. This is a brief summary of several strategies; some will raise your fair credit ratings right away, while others can take longer.
Dispute Inaccuracies
Check the accuracy of each credit report you receive from Experian, Equifax, and TransUnion. File a dispute with the applicable credit bureau if you find any mistakes.
As an alternative, you may also ask a reputable credit repair business to handle the procedure on your behalf. In any case, removing inaccurate information from your credit report may take some time. However, once you do, your credit ratings can significantly increase.
Make Payments On-Time
Your payment history has the biggest impact on your credit scores. Your creditors have the right to report any late payments of more than thirty days to the three main credit bureaus.
You might need to wait for your negative listings to become more outdated before taking action so that the impact on your credit score isn’t as great. In the future, remember to pay your bills first so that they arrive on schedule every month.
Pay Off Your Debt
If you want to improve your credit quickly, think about paying off a sizable portion of your debt. Reducing your debt might significantly improve your credit score, depending on how much you owe. This is particularly true for credit cards, as they have a more negative impact on credit than installment loans.
Maintain a Low Credit Utilization Ratio
When paying off your debt, the amount of credit you use on each credit line is an important factor to take into account. Your credit score will suffer if a credit card balance exceeds thirty percent of your credit limit.
Therefore, think about paying off each credit card debt to the 30% limit when choosing how to pay it off. You shouldn’t keep more than $3,000 amount on a credit card with a $10,000 credit limit, for instance, at any given moment.
Get a Secured Credit Card
Consider a secured credit card if you’re having problems receiving credit card approvals. A credit card that is guaranteed by a security deposit is known as a secured credit card. No credit check is required.
Your credit limit is often the same as the amount of your security deposit when you open a secured card. Just like any other credit card, you use it. After that, your payments are recorded with the credit agencies, which enables you to build a solid payment history.
Bottom Line
A fair credit score isn’t the worst-case scenario. However, like most things in life, there is always space for improvement.
You can create a plan to strengthen your credit habits when you’ve determined where your credit is lacking. In this manner, you can create a better financial future for yourself with loan terms that work for you and competitive interest rates.
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