What is a Bad FICO Score, and What Does it Affect?

A bad FICO score can hurt your chances for future loans and reasonable insurance rates and may require you to make deposits in utility accounts.

It is important to know what a bad FICO score is and how to improve it. The good news is that credit scores change monthly, and you can improve your bad FICO score with consistent effort.

First, let’s explore what makes up a bad credit score.

What Credit Score is Considered Bad?

Most credit reporting agencies and other businesses dealing with credit consider any FICO score below 679 a ‘bad score,’ but there are two categories to consider:

• Credit scores of 580 – 669  are ‘fair’
• Credit scores of 300 – 579 are ‘poor’

You may have more opportunities for financing with a fair credit score than with a poor score. If you can get financed with a poor score, you’ll likely pay much higher rates and fees.

How a Bad FICO Score Affects You

You might wonder, how serious is a bad FICO score? Is it really that important?

Here’s how a fair or poor credit score may affect you:

• High-interest rates – We discussed how a bad credit score could cause a high-interest rate; here’s why. A bad credit score means you aren’t financially responsible. You may make payments late, default on loans, or have too much outstanding credit. If a lender approves you, it will be for a higher interest rate to compensate for the risk.
• Harder to qualify – Many lenders won’t approve you for a loan if you have a credit score below 670. While you may find financing, you’ll have to look at ‘bad credit lenders,’ which can take time to find legit ones.
• Difficulty renting – Many landlords check your credit. They may not approve you to rent an apartment or house if you have a low score. If they approve you, they’ll likely require a large security deposit.
• Deposits on utilities – Many utility companies run your credit. If they discover you have a poor credit score, they will require a deposit to start your utilities.
• Fewer career opportunities – Many employers, especially those dealing with finances or other sensitive data, may check your credit. They may not consider you for the job if you have a low credit score.

3 Ways to Improve Your Credit Score

As we said, FICO scores change monthly, so there are opportunities to fix them. If you have a bad FICO score, try these tips:

1. Make your payments on time.

How well you pay your bills is the largest part of your credit score. Any payments made more than 30 days late decrease your score significantly. Focus on only borrowing what you can afford, and make your payments on or before the due date.

2. Avoid using your credit cards.

You shouldn’t have over 30% of your credit lines outstanding, as this can lower your credit score. If you have high credit card debt, find ways to decrease it quickly.

3. Check for fraud.

Everyone gets free access to their credit reports here. Check yours frequently to ensure all information is correct and no one has stolen your identity and ruined your credit score. If you find mistakes or fraud, report them to the credit bureaus immediately.

Final Thoughts

A bad FICO score doesn’t last forever if you take the proper steps. The key is to take charge of your finances with a reputable bank account and app to track your income and expenses, help you build a budget, and ensure you don’t overextend yourself and damage your credit score.