What Is a Fair Credit Score?

What Is a Fair Credit Score?

A fair credit score falls from 580 to 669 on the FICO score range or 601 to 660 on the VantageScore range (though VantageScore calls this “near prime”). This credit score tier sits above poor credit and below good credit. 

The fair credit score range is also well below the average credit score among Americans, which is 717, according to a FICO report from October 2023, the most recent data available. 

Having a fair credit score can make it challenging to qualify for competitive rates on loans, among other difficulties. However, you can take steps to improve your score and push it into the good range (or higher). 

Key Takeaways

• A fair credit score is a FICO score of 580 to 669 or a VantageScore of 601 to 660.
• Fair credit can indicate to lenders that you’ve had trouble managing money in the past and can make it difficult to qualify for a loan or access competitive interest rates.
• There are steps you can take to improve a fair credit score, including paying your bills on time and reducing your credit utilization.
• You can check your credit score through any one of a variety of credit monitoring services, and if you need help coming back from past mistakes you can hire a credit repair company.

FICO vs. VantageScore

A fair credit score falls from 580 to 669 on the FICO range and from 601 to 660 on the VantageScore range (VantageScore calls this tier “near prime”).

The most common models of FICO credit scores range from 300 to 850 and fall into five categories: 

VantageScores have the same overall range of 300 to 850 but are grouped into four categories:

Either way, a “fair” or “near prime” credit score can limit your borrowing options. You might need to enlist a co-signer to get approved for a loan and may have limited options when it comes to credit cards. Even if a lender approves your application for credit, you could end up with a smaller loan amount, higher interest rates, and more fees than someone with good or excellent credit. 

For example, here are the interest rates for new and used car loans by VantageScore tier, according to Experian’s State of the Automotive Finance Market Q2 2024 report. Near prime (fair) credit leads to interest rates nearly twice as high as those assigned to borrowers with super prime credit. 

Reasons for a Fair Credit Score

A fair credit score can make lenders wary of approving you for credit, as it indicates you may have fallen behind on payments or had financial troubles in the past. There are several reasons why your credit score could have fallen into the fair range, such as:

• Late or missed payments on loans, credit cards, or utility bills
• An account that went to collections
• High credit utilization, i.e., carrying high balances on your credit cards 
• A short credit history or limited credit accounts 
• Lots of hard credit inquiries in a short period of time 

If none of the above apply, you could also see damage to your credit score due to mistakes on your credit reports. If you find errors on your reports, dispute them with the credit bureaus to have them removed.

Important

An unexpected drop in your credit score could also be a sign of identity theft, which can drag down your credit score and harm your finances.

How a Higher Credit Score Can Help You

A higher credit score can open the door to a variety of financial opportunities. Here are some of the benefits of a good credit score.

• Easier to get approved for loans: Lenders look favorably on good credit and will be more likely to approve your application for a loan or line of credit. 
• Better interest rates: You’ll also typically get better rates, which could significantly lower the cost of borrowing money. 
• Access to rewards credit cards: A higher credit score can help provide access to valuable credit cards that offer perks like travel rewards and cash back. 
• Increased loan amounts and credit limits: Since lenders see strong credit as less risky, they may be willing to offer you higher loan amounts or increase your credit limit. 
• Fewer hoops to jump through: You may have an easier time accessing unsecured credit, whereas someone with weak credit may need to provide collateral or a co-signer to get approved. 
• Better chance of being approved for a rental home: Some landlords run a credit check when considering your application, and a higher score could make you a more appealing candidate. 
• Lower insurance premiums: Insurance providers consider your credit as a factor when determining your home and car insurance premiums in states where this is allowed. 
• No utility security deposits: Some utility companies, such as for gas, electricity, and water, may require a security deposit if you have poor or fair credit. 

How to Improve a Fair Credit Score

Given all the benefits of good credit, it’s worth putting in the effort to improve a fair credit score. Although you can do any of the following yourself, you can also hire a credit repair company to help. Some steps you can take include:

• Make on-time payments on your bills: Your payment history has a big impact on your credit score. In fact, it makes up 35% of your FICO score.
• Pay down your credit card balances: This strategy can reduce your credit utilization, which can have a positive impact on your score.
• Request a credit limit increase: Increasing your credit limit can also reduce your credit utilization, as long as you don’t start spending more. Contact your credit card companies or check your online dashboards to see if this is an option.
• Avoid too many hard credit inquiries at once: If you’re applying for a loan, such as a mortgage, try to keep your applications within a short window. Lots of hard credit checks can ding your score, but multiple inquiries clustered in a short period of time are counted as only one inquiry for scoring purposes.
• Keep your old accounts open: Avoid closing old credit accounts that are in good standing so you don’t reduce your available credit and increase your utilization. And if you close a credit account, eventually it’ll fall off your credit reports and potentially shorten the average age of your credit history, which can damage your score.
• Check your credit report for errors: Review a free copy of your credit reports at AnnualCreditReport.com for any mistakes (or use a credit monitoring service). If you spot any, submit a dispute with the credit bureaus.

Frequently Asked Questions (FAQs)

Why Did My Credit Score Drop From Good to Fair?

There are several reasons why your credit score may have dropped from good to fair, such as missing payments on your debts, a high credit utilization ratio, or lots of hard credit inquiries in a short period of time.

A drop in your credit score could also be the result of errors or identity theft, so it’s a good idea to check your credit reports right away. 

Can I Get a Credit Card With Fair Credit?

You can qualify for some credit cards with fair credit, but you may face higher interest rates and limited credit limits. You also may not qualify for the best rewards cards with a score in the fair range.

How Long Does It Take to Improve My Credit Score?

The amount of time it takes to improve your credit score depends on your individual situation, including your record of past mistakes, if any, and the steps you take. It may take a few months or years to see a significant improvement in your score. Some things, like paying off credit cards to reduce utilization, can have a very rapid effect on your scores, while others, like building up a positive payment history, can take much longer.

What’s a Good Credit Score for My Age?

According to Experian data from 2023, the average credit scores by age are: 

• Gen Z (ages 18–26): 680
• Millennials (27–42): 690
• Gen X (43–58): 709
• Baby boomers (59–77): 745
• Silent Generation (78+): 760

A good credit score for people of all ages starts at 670 in the FICO scoring model. 

How Many People Have Exceptional Credit Scores?

Nearly 22% of American consumers have exceptional credit scores of 800 or higher, according to 2023 data from Experian.

What’s the Difference Between FICO Scores and VantageScores?

Both FICO scores and VantageScores use the information on your credit reports to assign you a credit score between 300 and 850. However, the scoring models are unique and consider the impact of specific factors, such as payment history and credit utilization, somewhat differently. For example, payment history makes up 35% of your FICO score but 41% of your VantageScore.

FICO says its scores are used in 90% of lending decisions.

The Bottom Line

Fair credit is better than poor credit, but it can still make it challenging to qualify for a loan or access competitive interest rates. If your credit score falls into the fair range, there are steps you can take to increase it, such as paying your bills on time and reducing your credit utilization. Although you can’t fix your credit overnight, taking consistent action should help you see a net improvement over time. And if necessary, there are credit repair companies available to help.

Read the original article on Investopedia.