Credit Repair

What Is a Fair Credit Score?

“Fair” is a good thing when it comes to sports and the weather, but not your credit score. A fair credit score — between 580 and 669 for FICO or between 650 and 699 for VantageScore — could render you ineligible for certain credit cards and loans, or subject you to higher interest rates.

Even if you’re not in the market for a credit card or loan, it may be a good idea to focus on elevating your score now, so it’s where you want it to be when you need it.

Let’s take a look at what a fair credit score is, how to tell if you have one and steps you can take to improve it.

Do I have a fair credit score?

Your first step is to check your credit score. You can check your VantageScore 3.0 for free at My LendingTree.

Obtaining your FICO Score may require some legwork. American Express, Union Bank, Wells Fargo, Bank of America and various other financial institutions offer free credit scores for their account holders. You can find out where to get free FICO Scores from FICO’s website.

Checking either credit score won’t hurt your credit. While you might see a slight difference between your VantageScore and FICO Score, you will most likely fall into a similar range on each. If your score falls in the fair range, don’t panic. Credit scores are updated regularly, and taking small actions now can lead to future improvements.

Why is having better credit important?

Your credit score isn’t just a number. It’s a ranking that can have real-world consequences. Having better credit gives you more options when applying for loans and credit cards, buying a car or even renting an apartment. Your score will also help determine your interest rates and whether you’re subject to fees on credit cards and loans.

Lenders use your credit score to calculate mortgage rates. Comparing your options with a “fair” credit score and a “good” credit score can illustrate the benefits of increasing your credit score.

What factors influence my credit score?

The good news is that there’s no aspect of your credit score that you can’t improve with some patience and effort. Here are the factors that influence your credit score:

Payment history

One of the most important factors in your credit score is your payment history. If you always pay your bills on time, you should have a clean payment history. But late payments can hurt your score. And if you allow a bill to go 30 to 90 days late, it could end up in collections, which can cause your score to drop.

Amounts owed

Your credit utilization ratio is an important factor in your score. Simply put, this is the credit you’re using relative to your overall credit limit. For example, if you have a card with a $6,000 limit and a $3,000 balance, your credit utilization on the card is 50%. In general, lenders like to see utilization — both on specific cards and across all debt — at under 30%. It may make sense to prioritize paying off a card that has a high credit utilization ratio.

Length of credit history

The older your credit accounts, the better it is for your score. A long history of borrowing and repaying debt shows lenders you can handle your financial obligations. While you can’t go back in time to open a credit card, you can keep your oldest cards open, even if you no longer use them. This can also help keep your credit utilization low.

New credit

When you apply for a new line of credit, lenders perform a hard inquiry on your report. Unlike soft inquiries — the credit checks you perform yourself or the ones lenders use to preapprove you — a hard inquiry appears on your credit report and may ding your score. Too many hard inquiries in a short period can suggest you are loading up on debt, which is a red flag for lenders. That said, credit scoring companies expect you to shop for rates, so they may count multiple inquiries for the same type of loan made within a 14- to 45-day window as a single inquiry.

Types of accounts

Lenders like to see a diverse mix of credit on your report. Typically, that means a mix of revolving accounts (credit cards, home equity lines of credit) and installment loans (auto loans, mortgages). This shows lenders you can handle different forms of debt. Even accounts paid in full may boost your credit score. For example, a paid-off car loan (or any closed loan with a positive history) will stay on your credit report for 10 years.

How can I improve my credit?

Your score is updated regularly, so it’s possible to see moderate results fairly quickly. Here are some smart steps to start improving your credit:

Make any late payments now

If you have any missed or late payments, make them immediately. If they are only a few weeks late and a result of a misplaced bill, call your credit issuer and explain the situation. If you have debts in collections, paying them off or coming up with a payment plan can help you get your credit back on track. Even when a debt is paid in full, a derogatory mark may appear on your credit report and ding your score for seven years. However, the derogatory mark will have less of an effect over time.

Pay all your bills on time

Even if you have to carry a balance, paying at least the minimum amount due on all accounts every month can help improve your score. Try setting up automatic payments for recurring bills or set reminders for bills a few days before they are due.

Lower your credit utilization

Look at your spending habits across credit cards. Does one card with a $5,000 limit have $4,000 of debt on it? It may be smart to prioritize paying down that card to a maximum of 30% utilization ($1,500). Paying attention to how and when you use your cards can help you get your credit utilization in check, which should increase your score.

Keep older cards open

It may be tempting to close a card once you’ve paid off the balance, but that can affect your credit score. Instead, keep the line open.

Pay attention to credit checks

It may be tempting to open another line of credit to address some of your financial issues, but a hard credit check may temporarily lower your score — and if you only have fair credit, you may not get competitive financing terms. It may be a better idea to focus on paying down debt and getting your payments in order before you try to open a line of credit.

Consider getting help

If you feel you’re in over your head, or you may have multiple financial issues that need resolving, it may make sense to work with a credit repair agency. A credit repair agency can assess your credit report and help you dispute errors to potentially improve your credit score.

With a little work, you’re on the path to ‘excellent’ credit

While a “fair” score can feel demoralizing, it’s better to know where you stand so you can start making changes. Adopting smart financial habits can both improve your credit score and open financial opportunities for the future.

 

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