At a Glance
A fair credit score generally falls between 580 and 669, depending on the credit bureau. This score is usually considered adequate for obtaining certain types of loans, like basic auto or personal financing. While a fair score typically provides access to the most common loan products, it won’t always get you the best interest rates. On the other hand, a higher credit score means you have a better chance of getting reduced loan rates and being offered more favorable terms. Ultimately, a fair credit score isn’t great but is still relatively respectable and could open up some doorways to financial opportunities you may have thought weren’t available due to poor or mediocre credit history.
In this article, you’ll learn:
of Americans have fair credit scores.
What are credit scores?
Credit scores are numerical ratings representing an individual’s creditworthiness or the likelihood that they will repay their debts on time. Credit scores are based on an individual’s credit history and are used by lenders, landlords, and other financial institutions to evaluate their creditworthiness.
Credit bureaus and lenders use several credit scoring models, but FICO and VantageScore are the two most commonly used. These scoring models consider various factors, including payment history, credit utilization, length of credit history, types of credit used, and new credit inquiries.
Credit scores typically range from 300-850, with higher scores indicating a lower risk to lenders and a higher likelihood of being approved for credit with favorable terms, like lower interest rates and fees. Lower scores may result in difficulty obtaining credit or being approved for credit with less favorable terms, like higher interest rates and fees.
It’s essential to monitor your credit score regularly to ensure that it accurately reflects your creditworthiness and to identify any errors or inaccuracies that could negatively impact your credit. Maintaining a good credit score over time can increase your financial opportunities and save you money on borrowing.
Related: Credit Score Ranges
What is a fair credit score?
A fair credit score falls within a specific range, depending on the credit scoring model used. The two most commonly used credit scoring models are FICO and VantageScore.
A fair FICO score ranges from 580-669, while a fair VantageScore ranges from 601-660.
Fair vs. good credit score
Fair credit scores and good credit scores are different levels of creditworthiness. The range of credit scores can vary depending on the credit bureau, but generally, a fair credit score falls between 580-669, while a good credit score is between 670-739.
With a fair credit score, you may be approved for credit, but getting approved for loans and credit cards may be more challenging. A good credit score makes you more likely to be approved for credit products with better interest rates and terms or a higher credit limit.
Related: What Is a Good Credit Score?
How does fair credit affect you?
Having a fair credit score can affect you in several ways:
- Difficulty obtaining credit: Getting approved for credit, like loans or credit cards, might be more challenging. Lenders may see you as a higher risk borrower and offer less favorable terms, like higher interest rates and fees.
- Higher interest rates: If you are approved for credit with a fair credit score, you may be offered higher interest rates and fees than someone with a good or excellent credit score. This makes borrowing more expensive which means higher payments for you.
- Limited credit options: It can give you less options for credit products and then you won’t qualify for certain types of loans or credit cards.
- Difficulty getting approved for rental housing: Some landlords may check your credit score before approving a rental property and you may viewed as higher risk.
- Difficulty getting approved for employment: In some cases, employers may check your credit score as part of the hiring process. If they do, you may be seen as a higher risk candidate and therefore you could lose out on job opportunities.
How to improve a fair credit score?
Improving a fair credit score takes time and effort, but there are several steps you can take to help boost your score:
- Make payments on time: Payment history is one of the most critical factors that affect your credit score. Make at least the minimum monthly payment on your bills and loan payments on time.
- Pay down debt: High credit utilization, or the amount of available credit you use, can also negatively impact your credit score. Paying down debt can help reduce your credit utilization and improve your credit score.
- Avoid opening new credit accounts unnecessarily: Each time you apply for credit, it can result in a hard inquiry on your credit report, which can lower your credit score. Only apply for credit when you really need it and are confident you can get approved.
- Keep old credit accounts open: The length of your credit history is another factor that affects your credit score. Keep old credit accounts open, even if you’re not actively using them, to maintain a longer credit history.
- Check your credit report regularly: Monitor your credit report for errors, inaccuracies, and fraudulent activity. Dispute any errors with the credit bureaus to have them corrected.
- Consider a secured credit card or a credit-builder loan: If you’re having trouble getting approved for credit, a secured credit card or credit-builder loan can help you establish or rebuild your credit history.
Related: How to Improve Your Credit Score?
According to the FICO credit scoring model, a fair credit score is generally considered to be in the range of 580 to 669. This range is not considered excellent but is also not the worst possible score. A fair credit score suggests some risk associated with lending money to the individual, but it is not a high risk.
However, whether a fair credit score is considered average depends on the context. According to FICO, the average credit score in the United States is 711, which is higher than the range for a fair score. So, a fair credit score would be considered below average compared to the national average. However, if you’re comparing your score to others with similar demographics or circumstances, it may be more representative of an average score.
Whether a fair credit score is acceptable or not depends on the situation and the lender’s requirements. Generally, having a fair credit score may limit your credit options and result in higher interest rates or less favorable loan terms. However, it does not necessarily mean you will be denied credit altogether.
If you are applying for credit, like a loan or credit card, with a fair credit score, it’s important to shop around and compare offers from different lenders. Some lenders may be willing to work with individuals with fair credit scores, while others may have stricter requirements. Having a fair credit score may be a temporary situation that can be improved with responsible credit management.
Getting a loan with a fair credit score may be more challenging than obtaining a higher credit score. However, it’s not impossible. The availability of loans and the interest rates you offer may depend on various factors, like the lender’s requirements, the type of loan you seek, and your overall financial situation.
If you have a fair credit score, you may still be able to obtain a loan, but you may face higher interest rates and less favorable terms. You may also be required to provide more documentation or collateral to secure the loan. Look for lenders that specialize in working with individuals with fair credit or more flexible requirements. You may also consider applying for a secured loan, which requires collateral like a car or a savings account, as these loans may be easier to obtain with a fair credit score.
The minimum credit score required to buy a house can vary depending on the lender and the type of mortgage loan you are applying for. A fair credit score may make qualifying for a mortgage loan more challenging and result in higher interest rates and less favorable terms.
A fair credit score for most conventional mortgage loans is typically around 620 or higher. However, some lenders may require a higher score. For example, the Federal Housing Administration (FHA) requires a minimum credit score of 580 with a down payment of 3.5%, while a score of 500-579 may be considered with a higher down payment of 10%.
It’s important to remember that while a fair credit score may meet the minimum requirements for a mortgage loan, other factors like your debt-to-income ratio, employment history, and down payment amount will also be considered by lenders when determining your eligibility for a loan.
Knowing your credit score is essential for several reasons:
- Understanding your creditworthiness: Your credit score reflects your creditworthiness and how likely you are to repay debt on time. Knowing your credit score can give you an idea of how lenders perceive you and how likely you are to be approved for credit.
- Qualifying for credit: Many lenders use credit scores to determine whether to approve you for credit and, if so, what interest rates and terms you’ll be offered. Knowing your credit score can help you determine the types of credit you qualify for and the interest rates and terms you’ll likely receive.
- Monitoring your credit report: Your credit score is based on the information in your credit report, which includes details about your credit history, like payment history, credit utilization, and length of credit history. Checking your credit score regularly can help you monitor your credit report for errors, fraud, and identity theft.
- Improving your credit: Knowing your credit score can help you identify areas where you may need to improve your credit, like paying down debt or making payments on time. By working to improve your credit score over time, you may be able to qualify for better interest rates and terms on credit and loans