What is a bad credit score?
YOUR credit score is important when applying for a credit card or loan – and a bad score could get you rejected for all transactions.
This is because the score, sometimes called a credit score, determines your creditworthiness with lenders.
If your score is low, banks may consider you a subprime borrower and may refuse to lend you money.
Alternatively, you can get a worse rate or offer than advertised.
So what is considered a bad score and how can you improve yours? Below we explain what you need to know.
What is a bad credit score?
FICO, the most well-known credit scoring system, and its rival VantageScore both use a range of 300 to 850 points.
Naturally, the higher your credit score, the more likely you are to get the best deals.
A bad credit score, generally referred to as “fair” on both systems, is between 580 and 669 points on the FICO scale and between 601 and 660 points on VantageScore.
Meanwhile, a “bad” FICO score is less than 579 points.
How do I check and report my credit score?
There are many ways to check your credit score for free.
For example, many credit card companies, banks, and lenders have started providing credit scores to their customers.
It may appear on your statement, or you can access it online by logging into your account.
Meanwhile, the credit report is the information that lenders and companies use to calculate your credit score.
You are generally entitled to a free copy of your credit report every 12 months from each of the three national credit reporting companies.
These agencies include Equifax, Experian, and TransUnion.
However, due to the Covid pandemic, you can get free credit reports every week until April 2022.
You can order it from annualcreditreport.com, the only authorized website for free credit reports.
Alternatively, you can call 1-877-322-8228.
If you use VantageScore, a poor score is between 500 and 600 points and a “very low” score is between 300 and 499.
A good credit score is between 670 and 739 on the FICO system, while 740-799 is considered very good and anything above 800 is excellent.
Meanwhile, VantageScore considers a score between 661 and 780 to be good, and those above 780 to be excellent.
How Can I Build My Credit Score?
There are a number of things you can do to improve your credit score, from reducing your debt to checking your report for errors.
Pay your bills and debt repayments on time
Paying your bills and paying off your debts on time is one of the main factors contributing to a good credit score.
A missed or late payment can seriously damage your score and stay on your report for up to seven years, so make sure you pay your bills on time.
Reduce the amount of debt you owe
Another way to improve your credit score is to pay off your debts rather than shifting them.
Also, be sure to keep credit card balances as low as possible.
Check your credit report for errors
Errors do happen, so it’s important to make sure your report is correct.
We have explained how to get a copy of your credit report above.
If you spot anything incorrect, contact your lender.
Avoid making multiple credit applications in a short time
If you make multiple requests in a short period of time, it will make you appear desperate in the eyes of lenders and they will not be inclined to offer you credit.
It is important to only request it when you need it.
Before you apply for anything, be sure to use soft looking eligibility checkers to see if it’s likely that you’ll get the deal you’re looking for.
In 2020, a new credit scoring system was introduced – and it may prevent you from being accepted for cards and loans.
We have explained the credit scores you will need to buy a house and rent a car.
Plus, we’ve rounded up the best credit cards, including the ones that earn you reward points.