Do You Have a Fair Credit Score? Here’s What You Need to Know

Having a fair credit score is better than having bad credit but certainly not as great as having a good credit score. If your credit score falls under the fair score bracket, you might have fewer financial opportunities available. Work on building your credit score until you have good or excellent credit. You'll gain access to lower interest rates, better credit cards, and more.

To avoid making bad financial decisions and know your available credit options, you should understand where your credit score range falls. In this article, let's learn what a fair credit score is, how it may impact your financial situation, and what steps you can take to improve it.

What is a Fair Credit Score?

A fair credit score is a three-digit number that falls into the fair score range of the credit-scoring model used to calculate it. Numerous companies use different credit scoring models to calculate your credit scores. What fair credit means largely depends on the credit ratings you consider and the company that calculated them.

FICO and VantageScore are the two popular credit scoring models that use different formulas to determine a credit score. The credit scores under both models fall on a scale of 300 to 850. You may only see a few distinctions between the scores obtained from VantageScore and FICO. In most cases, a person with a fair FICO score will also have a fair score from VantageScore.

FICO	VantageScore 4.0
Poor: 300 to 579	Bad: 300 to 600
Fair: 580 to 669	Fair: 601 to 660
Good: 670 to 739	Good: 661 to 780
Very good: 740 to 799	Not Available
Exceptional: 800 to 850	Excellent: 781 to 850

 

What is a Fair FICO Score?

According to FICO, a fair credit score is a credit score ranging from 580 to 669. FICO scores are the most widely used credit scores, with 90% of top lenders using them when making lending decisions.

If you have a FICO score between 580 to 669, your score is considered below the average U.S. consumer score. Many lenders will still approve loans with this score, but there are chances that your interest rates are on the higher side. However, a score in the mid-660s could get you a loan with comparatively better rates than a fair credit score in the 500s would.

What is a Fair VantageScore?

A fair score, as per VantageScore, ranges from 601 to 660. The three major credit bureaus, Equifax, Experian, and TransUnion, created the VantageScore credit scoring model in March 2006 to compete with the FICO score produced by Fair Isaac Corp. (FICO).

Is Fair Credit Good?

The average credit score in the United States is 716, which falls in the FICO model's good credit range. Since your FICO score, if you have fair credit, will be between 580 and 669, it's lower than the national average score. Your credit score is neither good nor bad if you have fair credit. Because it falls somewhere in the middle, a fair credit score is frequently referred to as average. Generally, those with credit scores of 660 or higher are considered to be low-risk borrowers by lenders. On the other hand, those with credit scores below 660 might have a lower chance of getting loans with better terms.

Consider your fair credit score as an essential path leading to good credit. As you display healthy financial habits, you might see a boost in your credit score. Additionally, you'll know what it takes to raise your score once you understand the credit score ranges and the methodology used to generate them.

How Does a Fair Credit Score Work?

Your credit score is a significant three-digit number determined by the credit history recorded in your credit reports. Lenders use it to assess your creditworthiness, how likely you'll pay back your loans on time, and to decide whether or not to lend you money. Borrowers generally want a good or excellent score. It's believed that the higher your score, the greater your chances of getting approved for a loan and securing a low annual percentage rate (APR).

If your credit score is fair, lenders would probably consider you a subprime borrower - someone who will find it challenging to repay their debts. You may often face refusals for a loan, credit card, or another type of credit. Even if you are accepted, some lenders might charge a higher APR for a borrower with fair credit than someone with strong credit. Over the loan term, your fair credit rating could cost you hundreds or even thousands of dollars. So, given a chance, you should always try to improve your credit scores.

How to Improve Your Fair Credit Score

Even though you might be eligible for loans with fair credit, raising your score could help you obtain more favorable loan terms. You can use the following four steps to increase your fair credit score:

1. Manage Credit Responsibly

There are various ways to show lenders that you are a responsible borrower. Aim to make your payments on time each month to demonstrate to lenders that you comply with the terms of your loan agreement. Making late payments or skipping payments can lower your credit score because your payment history accounts for 35% of your credit score.

Your credit utilization ratio is the ratio of credit you have used with your total available credit. You should target 30% or less of your available per account to maintain a healthy credit profile. For instance, if your credit limit is $2,000, your monthly balance shouldn't exceed $600. You can Try to keep your utilization ratio even lower if you want to speed up improving your credit scores. This strategy will also helps with keep your debt in check.

2. Consistently Monitor Your Credit Report

Regularly reviewing your credit reports can assist in ensuring the accuracy of the data reported to the credit bureaus used to determine your credit score. AnnualCreditReport.com offers free copies of your credit reports from the three main credit bureaus: TransUnion, Equifax®, and Experian.

3. Avoid hard inquiries from credit card applications

A high number of credit accounts opened quickly could lower your rating. Credit scoring systems take into account recent inquiries. When you apply for a credit card, the lender conducts a hard inquiry and carefully reviews your credit report. With each hard inquiry, your credit score could be reduced by two to five points. Applying for credit cards you don't need or too many cards within a short period can take your scores from fair to poor credit range. To avoid having too many hard inquiries on your credit record, only apply for a credit card once every four to six months.

4. Use Credit Builder borrowing options:

If you're starting to build your credit history, you might want to add a credit card or a credit-builder loan. There are some excellent credit cards available for people with fair credit. You may have difficulties getting credit cards with excellent terms if your credit score is on the low end of the fair range. In that case, you can look for secured credit cards. A credit-building loan from a financial institution can be another excellent option. The FICO score recognizes this form of loan as an installment loan. Therefore that also offers you a slight increase in the credit mix category of your credit report.

Keep in mind that credit-building takes time. There isn't a quick remedy to turn your fair scores into exceptional ones. However, there's no wrong time to begin practicing good financial habits that will help you build your credit.

How to Get a Loan With Fair Credit?

Suppose you still want to get a loan with fair credit. In that case, you can consider the following ways before applying for a personal loan to raise your chances of getting approved even with a fair credit score:

Prequalify for the loan:

As the first step, you can check whether a lender offers prequalification if you're unsure of your eligibility for a loan with that lender. Doing this will prevent further damage to your credit score before applying.

Find a co-signer:

Although a co-signer shares the same risk and responsibility for your loan, they may make it simpler for you to qualify with bad or fair credit. A co-signer with good or excellent credit can improve your overall creditworthiness.

Reduce your debts:

In addition to your credit score, many lenders also consider your debt-to-income ratio. Before submitting a loan application, try to pay off your credit card debt to improve your credibility in the eyes of potential lenders.

Borrow from your existing lender:

Suppose you have a history of making on-time payments on your accounts. In that case, your current lender may understand your credit standing better irrespective of your credit score.

Fair Credit Vs. Good Credit

Whether it is FICO or VantageScore credit score scale, fair and good credit are next to each other. However, your borrowing opportunities and financial challenges can significantly vary between the two credit score ranges.

Your credit score is one of the simplest ways a potential lender can check your creditworthiness. Generally, borrowers with good or excellent credit are less likely to fall behind on their payments. As a result, you're more likely to be approved for a loan if you have a high credit score because it shows you are a low-risk consumer. You may also be eligible for better credit card rewards with a good credit score, such as substantial cash offers and increased credit limits. Furthermore, a good credit score over fair can make renting a house or apartment easier. Landlords check your credit to evaluate your likelihood of paying rent on time.

Conclusion

Knowing where you fall on the credit score is crucial to make better credit decisions. In most cases, lenders will require you to have a credit score that is at least fair to approve a loan application. So, you shouldn’t view your fair credit score as a terrible thing. Having a score of around 630 is significantly better than having low credit concerning your financial options, but this isn't where you should stop. You can make a point to regularly check your credit score to find any errors or inaccuracies that may harm your score and bring it down. Since your scores are not bad or poor, you can enjoy the perks of a good credit score by just putting a little effort into raising your credit score.

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What is a Credit scores Bureau, as well as Exactly How Does It Work?

A credit bureau is an organization that aggregates data on individual consumers and sells that data to lenders. These bureaus allow potential lenders insight into the creditworthiness of a potential debtor.

Credit bureaus gather information from a wide array of sources. Different financial institutions report data to credit bureaus. These mainly include banks and credit unions but extend to auto lenders, credit card issuers, and online lenders. Additionally, credit bureaus explore other available public records ranging from court orders to property records.

The major credit bureaus in the United States are Equifax, Experian, and TransUnion. Each of these organizations calculates credit reports slightly differently, meaning it's common to get varying results from the different bureaus. Many potential lenders use an average of the three scores to get the most holistic understanding possible.

While this may seem complex, the good news is that all three bureaus are looking for similar patterns when they analyze your credit history. For example, they want to see on-time payments, a healthy credit mix, and low utilization on your lines of credit.

This article will cover the basics of how credit bureaus work, why they're essential, and what is their primary function.

Why are Credit Bureaus Important?

Lenders must carefully consider credit risk when deciding whether or not to lend money to an individual consumer. Lenders that are too lax with their requirements risk handing out funds that are not repaid, which is problematic for the organization. On the other hand, lenders that are inflexible with funds miss opportunities and lose potential clients.

Striking the correct balance is, therefore, a crucial task. Specific, independent data aggregation and reporting become immensely valuable. Credit scores provide objective metrics by which lenders can make decisions.

What are those metrics, exactly? Lenders (and, by extension, credit bureaus) are eager to see that you are not utilizing a dangerously high percentage of your existing credit. They want to know that you are paying all your bills on time. And they want to see that you have maintained a healthy mixture of account types over a long period.

It's worth noting that consumer reporting agencies do not grant or deny loans. Instead, they calculate creditworthiness using payment history and credit information. Most lenders take into account a wide range of factors. Sometimes factors such as income, savings, and existing debts can play an even more significant role than credit scores in these lending decisions. However, credit scores are a common influence on lending decisions.

How Does a Credit Bureau Work?

Credit bureaus receive reports from various institutions that allow them to build a comprehensive portrait of any individual consumer's financial accounts. Using a variety of factors found in your credit history, these institutions calculate an overall credit score, mainly ranging from 300 to 850. The relative value of each score can vary depending on the agency reporting and the lender's criteria. However, as a general rule:

300 to 499 is considered Very Bad
500 to 600 is considered Poor
601 to 660 is considered Fair
661 to 780 is considered Good
781 to 850 is considered Excellent

As we will discuss later in this article, your exact score can depend on which bureau you ask. It can also depend on factors such as the circumstance in which you are applying for credit. FICO will calculate a slightly different value for your score based on personal elements, such as what type of asset or loan you are attempting to get.

What are the Three Main Credit Bureaus?

As noted in the introduction, the three main credit bureaus in the USA are Experian, Equifax, and TransUnion. These companies coordinate with lenders across the country to gather and organize an up-to-date database containing information on the credit history of millions of Americans. This information empowers companies to understand the risks associated with any loan they may consider giving. It also allows consumers to take advantage of credit by building a positive score. (Though if you do not currently have a good credit score, low credit options are available for you, too.)

Which Credit Bureau is Most Often Used?

Of the three main credit bureaus, Experian is the largest. However, Equifax and TransUnion are frequently used and significant credit bureaus. You will want to keep an eye on all three major credit reporting agencies to track your credit score and monitor the reports for errors. Together, these three bureaus are the most used and best-recognized agencies in the United States. And nearly any type of loan you try to get will take your reports from these agencies into account one way or another.

What Does a Credit Bureau Do?

Institutions such as Experian, Equifax, and Transunion are data collectors. They coordinate with banks, credit unions, and other lending institutions while researching publicly available information to form financial overviews of individual consumers.

Credit Bureaus then sell that information to prospective lenders who want to make educated choices regarding how much money they lend to any individual. (And whom they should not lend to in the first place.)

What Information is Collected by Credit Bureaus?

A few pieces of information regularly analyzed by credit bureaus include:

• Payment history
• Account balances
• Account open dates
• Date of the last activity
• High credit on an account
• The credit limit on each account

Agencies such as Equifax also collect information on debt collections and bankruptcies.

How Does the Credit Bureau Get Information?

Credit bureaus have ready access to information on your financial accounts because lenders readily share that info. Lenders voluntarily comply with these requests because the credit bureaus have a longstanding reputation and because lenders rely on the credit reports that Bureaus receive.

Data regarding on-time payments, account balances, etc., then get aggregated into a final score based on all this information. FICO and VantageScore are the most common scoring systems, which have slowly converged into increasingly similar algorithms. Both systems now weigh consumers on a scale of 300 (Low) to 850 (High) in terms of credit scores.

Why Do I Get Different Credit Scores for Each Bureau?

Some consumers need clarification when they first check their scores and see that different bureaus have different scores. Relax: this is a common occurrence. This can happen for a few reasons.

• Different bureaus may keep different schedules for collecting and aggregating information, meaning they base your scores on slightly different windows of time.
• Some lenders may report to one or two credit bureaus, while others report to all three.
• Bureaus can use different scoring models which calculate your score a little differently.

In addition to differences between bureaus, different lenders may also use slightly different criteria. FICO, for example, offers many distinct models for evaluating creditworthiness. They may provide a score for auto lending and place more importance on someone's auto payment history over their on-time credit card bill payments, for example.

Discrepancies between bureaus are often no cause for concern. However, this topic does underscore the importance of keeping tabs on your credit reports. By paying attention to the individual line items in these reports (which you can request for free from each of the bureaus), you can stay alert for any false information.

Incorrect information on your credit report can arise for several reasons. Identity fraud is one of the most pressing issues. Though simple mistakes can also occur, they must be dealt with swiftly to avoid headaches.

Conclusion

Credit scores can seem confusing or even overwhelming. There are multiple bureaus and thousands of potential lenders, each of which has specific criteria for evaluating creditworthiness.

The good news is that many options are available for anyone looking to borrow money or get cash fast. Though having a good credit score is always helpful, it's not strictly necessary. And irrespective of whether you require funds, you can try to boost your credit scores. Some lenders offer loans to those with poor credit.

One option you may wish to consider if you are looking for loans you can obtain with any credit is Cash 1 Loans. We offer various options, from title loans to installment loans to lines of credit. Our short-term loans can help you get cash in your pocket quickly, so you can cover your expenses and get back to focusing on the things that matter most.

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