A bad credit score generally falls below 630 based on the two most commonly used credit measures FICO and VantageScore.
Bad credit can stand between you and the credit deal you want. It can mean you get turned down — or that you get approved, but at a much higher interest rate than if your credit score were higher.
Individual lenders and card issuers set their own guidelines, but here’s how the categories generally fall on a scale of 300 to 850:
Know where your credit score stands
According to latest figures from FICO, 20 percent of Americans scored under 600.
If you’re not sure where you stand, there are plenty of free scores available. Some credit cards offer them, and so do many personal finance websites, including NerdWallet.
A lousy credit score doesn’t mean you’re a bad person — it might just mean you put some unexpected bills on a credit card and had trouble paying, or that you missed a car payment when you lost your job.
Credit is really just a tool, and what makes a score “bad” depends on what you want it to accomplish for you.
If you had a low credit score and but worked hard to get it high enough to lease a car, the number you see will represent victory. But if your goal was to get a mortgage at a low interest rate, an identical score might be a crushing disappointment.
What to expect with bad credit
If your credit score is in the low 600s or below, lenders will not fall all over themselves to attract you as a customer.
Many will reject you outright. Every lender makes its own decisions about the kinds of risks it is willing to take in extending credit. Some cater only to those with excellent credit, so even someone with a score of 695 could be rejected.
Every lender makes its own decisions about the kinds of risks it is willing to take in extending credit.
If a lender does agree to extend you credit, you’ll pay more in interest than someone who has a higher credit score.
You’ll face subprime rates to finance a car or a house. You may also have to pay more for auto and home insurance, and you may be stuck paying utility deposits that people with higher credit scores get to skip.
Luckily, your credit scores are only a snapshot based on your credit report at that moment. They change, and frequently.
You can improve your credit
It usually takes a lot longer to turn a bad score into a good one than it does to ruin a good score, so it’s important to know where to focus your efforts.
By far the biggest factors are on-time payments and credit utilization. That means you need a track record — the longer, the better — of payments made by the due date and your credit card balances need to stay below 30% of your overall limit. You won’t see a big jump in your score if your bills are late and your balances are near your credit limits.
There are credit products that can help you build or rebuild your credit. Three worth trying are:
- A secured credit card. You make an initial cash deposit, which typically becomes your credit limit. You then use the card like a regular credit card, being careful to pay your bill on time and keep your balance low.
- Credit-builder loans. A loan amount is released to you after you pay off the loan. Make sure the lender — typically a credit union or community bank — will report your payments to the three major credit-reporting agencies.
- Becoming an authorized user. If someone who has a long record of on-time payment and low credit utilization is willing to add you to a credit card, your credit could benefit.