A FICO score between 580 and 669 or a VantageScore between 601 and 660 is considered to be fair. It typically falls below the national average for American consumers and tells lenders that a borrower is more likely than the average to have trouble repaying their debts.
Fair Credit Score: What Is It?
A fair credit score is one that falls within the "fair" score range of the particular credit-scoring model that was used to generate it. For American consumers, it is typically below average. A score between 580 and 669 on a scale from 300 to 850 is considered fair in the Fair Isaac Corporation's FICO scoring model, which is used in 90% of lending decisions. VantageScore considers a score between 601 and 660 to be fair and uses the same score range as the FICO model. It should be noted that the above score ranges apply to VantageScore 3.0 and base FICO scores (such as 8, for example). Different credit score scale ranges can be found in FICO Auto and Bankcard scores as well as older VantageScore models (2.0, for example).An Explanation of Fair Credit Scoring
Your credit score is a significant three-digit number that is determined by the loan activity in your bank statements that are recorded with each of the three major credit bureaus (Equifax, Experian, and TransUnion). Lenders use it to assess your creditworthiness—how likely you are to pay back your debts—and make lending decisions. Generally speaking, you want a score of "good" or "excellent," as the higher your score, the better your chances are of being approved for a loan and obtaining favorable terms such as a low annual percentage rate (APR) and other conditions that can reduce your monthly and lifetime loan costs. If your credit score is deemed fair, lenders are likely to classify you as a subprime borrower—someone who will find it difficult to pay back their debts. Because of this, you might be flatly denied a loan, credit card, or another type of credit. Even if your application is accepted—and some lenders will accept a borrower with a fair credit score—you might be charged a higher APR than someone with a good credit score. Your poor credit history could end up costing you hundreds or even thousands of dollars over the course of the loan. Let's say, for illustration purposes, that you are looking for your first home and have a fair FICO credit score of 659. You might be eligible for a 30-year fixed-rate mortgage with an APR of 5.495 percent based on the national average interest rates in April 2022. You would pay $851 each month and $156,437 in interest over the course of a 150% loan on a sum of $150,000. With a good FICO score of 670 and eligibility for a lower rate of 5.065 percent, you would pay $40 more each month and $14,404 more in interest overall. The scores from each of the three main reporting bureaus may differ slightly, even when using the same scoring systems. Lenders might have provided updates or slightly different information at various times.Comparing a fair credit score to a good credit score
In terms of range on the credit score scale, a good score—which begins at 670 in the FICO model or 661 in the VantageScore model—is not materially inferior to a fair score. But in terms of the borrowing options they provide, the two score classifications are very different from one another. Statistics show that borrowers with good credit are less likely to fall behind on their payments. Therefore, they are more likely than a subprime borrower with a fair score to be approved for a loan or credit card, secure a lower APR, lower monthly payment, and lower lifetime loan costs. However, the advantages of a marginally higher credit score don't stop there. You may be eligible for better credit card rewards with a good credit score, such as generous cash-back offers and increased credit limits. Even more so than it would be if you had a fair credit score, a good credit score makes it simpler to rent a house or an apartment. Fair Credit Score Good Credit Score Borrowers are considered subprime by lenders. Lenders consider borrowers to be low risk. Borrowers face a higher APR and fewer approval chances. Borrowers are more likely to be approved and receive a lower APR. Borrowers pass up the best credit card offers. Borrowers may be eligible for enticing credit card rewards. Renting a house or an apartment is more challenging. Renting a house or an apartment is simpler.The Best Ways to Raise Your Fair Credit Score
Make use of these recommendations to improve a poor credit score to good or better. View your credit score: Ask your credit card company if you can view an approximation of your credit score for free in order to gauge how much further your fair credit score is from a good score. A credit bureau or FICO are other sources where you can purchase your score. Check for mistakes on your credit reports and fix them: To fix the issue that is preventing your fair credit score from improving, use your credit reports to find the questionable borrowing activity. By visiting AnnualCreditReport.com once a year, you can get free copies of your credit reports from each of the three bureaus. Contact the bureau to have any mistakes fixed if you find them (a late payment that wasn't actually late, for example). Checking your own credit reports constitutes a "soft" inquiry and will not affect your credit score. Pay your bills on time: Your payment history is the single most significant factor used to determine your VantageScore or FICO credit score. Create a budget to ensure you have enough money each month to cover your debt payments, and always make them on time. You can use your bank to set up automatic payments if that helps. Maintain a credit utilisation rate under 30%, which is the percentage of your credit available that you owe. Lenders prefer that you stay well below your credit limit. Paying off your outstanding balances is the best way to reduce this ratio, but you can also raise your credit limits. Rarely open new accounts: Hard inquiries from new credit cards and loan applications can temporarily lower your credit score. Try to limit the number of these applications. Obtain credit based on alternative payment history information: Experian, for instance, provides a feature called Experian Boost that allows you to reflect on-time phone/internet and utility payments in your credit reports. When you choose the appropriate payments and give Experian permission to connect to your bank accounts, your score will be updated right away.Major Points
- Having a VantageScore between 601 and 660 or a FICO score between 580 and 669 is equivalent to having fair credit.
- With a score in this range, lenders consider a borrower a subprime, which reduces the likelihood that their loan will be approved and often results in more expensive loan conditions like a high APR.
- Your fair credit score can be improved in two ways: by keeping a low credit utilisation ratio and by making on time payments.
