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 United States is 716, which is considered a good credit rating. Now that means your fair credit score is below the national average, but don’t let that put you off.
Instead, think of your fair credit score as a necessary pit stop on your way to good credit land. Once you understand credit score ranges and how scores are calculated, you’ll know what it takes to improve your score.
|FICO score 8||FICO Credit Score||VantageScore 3.0||VantageScore credit score|
|579 and under||Poor||300-499||Very poor|
There are many versions of credit scores, so let’s focus on the two most important: FICO and VantageScore. FICO scores are used by 90% of lenders, so let’s take a look at this score first.
Here are the FICO score ranges:
- Outstanding: 800+.
- Very good: 740 to 799.
- Good: 670 to 739.
- Correct: 580 to 669.
- Poor: 579 and below.
According to FICO, a fair credit score means that lenders consider you to be at medium to high risk of default, which means that about 28% of consumers with a fair credit score are likely to become delinquent. When you have a good credit score, you have a harder time getting approved for credit. And when you are approved, your interest rates are high.
Take comfort in knowing that when you get to mid-660s, you’re about to jump into prime territory (around 670s). You still won’t get the offers that someone with great credit gets, but you’ll have a better chance of getting approved for credit. And, of course, you’ll get better rates than you’d get at the lower end of the fair credit category.
VantageScore ranges from 300 to 850, just like the FICO score. Here are the VantageScore credit ranges:
- Excellent: 781 to 850.
- Good: 661 to 780.
- Fair: 601 to 660.
- Poor: 500 to 600.
- Very bad: 300 to 499.
Note that with this version of score, the fair credit score range is 601 to 660. With FICO score, the fair credit score range is 580 to 669. There is some overlap, but with VantageScore , you only need a score of 661 to pass in the good credit bracket. With FICO, you need a score of 670 to have good credit.
The reason for the difference is that these two types of scores weigh factors, such as credit history, slightly differently. So, although they have the same score range of 300 to 850, they cannot be directly compared.
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 considered:
- Payment history: 35%.
- Amounts due: 30%.
- Length of credit history: 15%.
- New credit: 10%.
- Loan composition: 10%.
Note that payment history and amounts due 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 bit, if you develop these credit habits, you’ll be in a good position to increase 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.
It is therefore essential that you are brutally honest when setting your budget. If you already have a budget, read it over to make sure the numbers still apply.
If you cut spending without committing to the cuts, your budget will be meaningless. When your budget doesn’t make sense, you overspend with your credit cards and go into debt. When you’re in debt your score usually goes down, that’s how it all connects. A shaky foundation equals a shaky credit score.
Track every dollar you spend: If you think tracking your expenses is too difficult to do, you’ll be pleasantly surprised. You don’t need to use pencil and paper or create a complex spreadsheet in Excel unless it 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 getting you involved with your finances.
Keep your credit usage low: Your credit utilization ratio is the amount of credit you have used compared to the amount you have available. You want to keep your ratio below 30%. For example, if you have a credit limit of $2,000, your balance for the month should not exceed $600. But to speed up your quest for good credit, keep it below 10%, or $200. This approach also helps you stay out of debt because you’re not using your credit cards to the max.
Use credit creation tools: No, you are not allowed to go buy a sports car in the name of building credit. But if your credit resume is fairly straightforward, consider adding a credit card or credit loan.
There are 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 this happens. These cards are listed on your credit report as a revolving credit card account. You need to put down a deposit to get the card, but a secured credit card is a great way to build or rebuild credit.
Another option is to get a loan from a local credit union or bank. This type of loan is identified as an installment loan by the FICO score, which also gives you a little boost in the “credit mix” category.
Spread out credit card requests: The credit card application leads to a thorough investigation, which means that the lender carefully examines your credit report. A serious investigation has the potential to remove about two to five points from your credit score. And it’s for each application.
Applying for cards you don’t need (or can’t qualify for) can drop your score into the poor credit range (579 and below) if you’re not careful. Apply for a credit card only once every four to six months so you don’t have too many inquiries on your credit report. When lenders see a bunch of tough inquiries on your report, that’s a red flag. They fear you are in desperate need of credit.