If you have a fair credit score, your FICO score is between 580 and 669. Overall, FICO scores range from 300 to 850. The average score in the U.S. is 716, which is considered a good credit score. Now, that does mean that your fair credit score is below the national average, but don’t let that discourage you.
Instead, think of your fair credit score as a necessary pit stop on your way to the land of good credit. Once you understand the credit score ranges and how scores are calculated, you’ll know what it takes to improve your score.
|FICO Score 8||FICO Credit Rating||VantageScore 3.0||VantageScore Credit Rating|
|579 and lower||Poor||300-499||Very Poor|
What Is a Fair FICO Score?
There are many credit score versions out there, so let’s just focus on the two most important ones: FICO and VantageScore. FICO scores are used by 90% of lenders, so let’s take a look at that score first.
Here are the FICO score ranges:
— Exceptional: 800+.
— Very good: 740 to 799.
— Good: 670 to 739.
— Fair: 580 to 669.
— Poor: 579 and lower.
According to FICO, a fair credit score means that lenders view you as having a medium-high risk of delinquency, which means that around 28% of consumers with fair credit scores are likely to become delinquent. When you have a fair credit score, you have a more difficult time getting approved for credit. And when you do get approved, your interest rates are on the high side.
Take comfort in knowing that when you make it into the mid-660s, you’re very close to leaping into prime territory (around 670). You still won’t get the deals that someone with excellent credit gets, but you’ll be more likely to get approved for credit. And, of course, you’ll get better rates than you’d get in the lower range of the fair credit category.
What Is a Fair VantageScore?
VantageScore ranges from 300 to 850, just like the FICO score does. These are the VantageScore credit ranges:
— Excellent: 781 to 850.
— Good: 661 to 780.
— Fair: 601 to 660.
— Poor: 500 to 600.
— Very poor: 300 to 499.
Note that with this score version, the fair credit score range goes from 601 to 660. With the FICO score, the fair credit score range is from 580 to 669. There’s some overlap, but with VantageScore, you only need a score of 661 to cross over into the good credit range. With FICO, you need a 670 score to have good credit.
The reason for the difference is that these two types of scores weigh the factors, such as credit history, a little differently. So while they have the same 300-850 score range, they can’t be directly compared.
How Your FICO Score Is Calculated
Once you understand what goes into the FICO score calculation, you’ll have a better chance of using it to your advantage. Here are the five factors that are considered:
— Payment history: 35%.
— Amounts owed: 30%.
— Length of credit history: 15%.
— New credit: 10%.
— Credit mix: 10%.
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Note that payment history and amounts owed make up 65% of your FICO score. Paying attention to these two factors in particular is extremely important. OK, now that you know what makes up your credit score, you’re ready to turn your fair credit score into a good credit score.
How to Get a Good Credit Score
Although the score ranges for fair credit vary a little, if you develop these credit habits, you’ll be in a good position to boost both your FICO score and your VantageScore.
Create a budget that works for you: You might be wondering what this has to do with your score. Think of your credit score as a house. Your foundation for this house? A budget that shows where your money is going.
So it’s essential that you’re brutally honest while setting up your budget. If you already have a budget, go through it again to make sure the numbers still apply.
If you slash expenses without being committed to the cuts, your budget will be meaningless. When your budget is meaningless, you overspend with credit cards and get into debt. When you’re in debt, your score usually drops, so that’s how all this connects. A shaky foundation equals a shaky credit score.
Track every dollar you spend: If you think tracking your spending is too hard to do, then you’re going to be pleasantly surprised. You don’t have to use pencil and paper or create a complex spreadsheet in Excel unless that really makes your heart sing.
You can track your spending using free online money management programs, such as Mint.com, or with free credit score apps. Or you might prefer a tool like YNAB (youneedabudget.com), which isn’t free but does a great job of keeping you involved with your finances.
[Read: Best Secured Credit Cards]
Keep your credit utilization low: Your credit utilization ratio is the amount of credit you’ve used compared with the amount you have available. You want to keep your ratio under 30%. For instance, if you have a $2,000 credit limit, your balance during the month shouldn’t exceed $600. But to speed up your quest for good credit, keep it under 10%, or $200. This approach also helps you avoid debt because you aren’t maxing out your credit cards.
Use credit-building tools: No, you do not have permission to go buy a sports car in the name of credit-building. But if your credit resume is pretty bare, consider adding a credit card or a credit-builder loan.
There are some good credit cards that target those with fair credit. If you’re at the low end of the fair credit range, you might have trouble getting approved for credit cards.
Take a look at secured credit cards if that happens. These cards are listed on your credit report as a revolving credit card account. You do have to put down a deposit to get the card, but a secured credit card is an excellent way to build or rebuild credit.
Another option is getting a credit-builder loan from a credit union or from a local bank. This type of loan is identified as an installment loan by the FICO score, so that also gives you a small boost in the “mix of credit” category.
Spread out credit card applications: Applying for a credit card results in a hard inquiry, which means the lender looks at your credit report carefully. A hard inquiry has the potential to lop off about two to five points from your credit score. And that’s for each application.
Applying for cards you don’t need (or that you can’t possibly qualify for) can drop your score down into the poor credit range (579 and below) if you aren’t careful. Only apply for a credit card once every four to six months so you don’t have too many hard inquiries on your credit report. When lenders see a bunch of hard inquiries on your report, it’s a red flag. They worry you’re desperate for credit.
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