Average credit may be nothing to write home about, but you’re definitely in a better place than those with bad or no credit. Understanding how credit scores work and how to take yours from fair to good could open up new opportunities and lower rates for you down the road.
Your FICO score is a number that sums up your creditworthiness. It is a snapshot of your current credit standings and is used by banks in determining whether you’re worthy of a credit card and if so, which type.
Under the FICO scoring system, anything less than 630 is considered “bad credit,” a score from 630 to 689 is considered “fair,” 690 to 719 is a “good” credit score, and 720 to 850 is “excellent.”
As someone with a credit score between 630 and 689, you likely receive credit card offers for fair credit including cards with moderate interest rates and fees. You are still blocked from many of the premium cards with the best rewards offers, however. Gaining access to those cards would take good to excellent credit.
Moving your score up the ranks takes time and concentrated effort, but it doesn’t have to be difficult.
Your credit score is determined from a combination of your payment history, your credit utilization, new credit, the types of credit used and the length of your credit history. By paying attention to how your actions impact these factors, you can move out of the “fair” range and into good credit territory.
Some quick tips on increasing your credit score:
Always make your payments on time.
One late or missed payment can blemish your credit score. Automate your monthly payments, set reminders or take steps to ensure no due dates slip by unnoticed.
Limit new credit applications.
The more you ask for additional credit, the more likely those inquiries will hurt your credit score.
Track your credit score and review your credit report for errors.
Knowing where you stand will help you gauge how your efforts are paying off. Also, if you find errors on your credit report, getting them corrected could immediately raise your score.
Budget and use your credit wisely.
Don’t use your credit card to purchase things you can’t afford. Your credit cards aren’t an exception to your budget; they are part of it.
Fair credit isn’t a bad thing. You’re doing better than many people out there. But there’s certainly room for improvement. Moving your credit from fair to good could translate to better loan terms when you’re ready to purchase a home and better credit card offers from the banks.
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The post What FICO Score is Considered Fair Credit? appeared first on NerdWallet Credit Card Blog.
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