What leads to a fair credit score?
Quick insights
- According to the FICO® scoring model, a credit score between 580 to 669 is considered fair.
- Factors like payment history, credit utilization and length of credit history can influence your credit score.
- Lenders typically consider your credit score when making lending decisions, along with other factors like your income and debt-to-income ratio.
Your credit score is a three-digit number that lenders use to assess your creditworthiness, influencing everything from loan approvals to apartment rentals. If you are looking to improve your score, understanding the behaviors that impact it can be a first step toward improvement.
Defining a fair credit score
Of two popular credit scoring models—FICO 8 and VantageScore® 3.0—only FICO includes a fair credit scoring range, which is between 580 and 669. VantageScore previously categorized scores from 600 to 660 as “fair” but now refers to this range as “near prime.” Both models use data from the credit bureaus—Experian™, Equifax® and TransUnion®—to calculate your score.
It can be helpful to remember that credit scores can fluctuate and improve with healthy habits. Lenders use these scores along with other factors, such as your income and overall financial situation, when evaluating credit applications.
Factors influencing your credit score
Several components influence your credit score. Understanding these can help you identify what might be contributing to your credit score:
- Payment history: This is often the most significant factor. Lenders may see a history of missed payments as a sign of higher credit risk.
- Credit utilization: This refers to the amount of available credit you are using. A credit utilization ratio of 30% or below is generally favorable.
- Length of credit history: Keeping old credit accounts open may help lengthen your average account age, which can be helpful for your score.
- Credit mix: Having a variety of credit accounts—such as credit cards, installment loans (like car loans or student loans), and mortgages—can positively influence your score. What matters most is how responsibly you manage those accounts over time.
- New credit: Opening multiple new credit accounts in a short period can temporarily lower your credit score. Each new application can result in a hard credit check, which might slightly reduce your score.
Familiarizing yourself with these factors and reviewing your credit report may help you understand why your score is in the fair range.
Common reasons for a fair credit score
There are several factors that could be contributing to a fair credit score:
- Limited credit history: New credit users often lack sufficient history for lenders to assess risk.
- Late or missed payments: Even one late payment could impact your credit score.
- High credit card balances: Consistently using a large portion of available credit (high utilization) might signal risk and hinder score improvement.
- Limited credit mix: Relying on only one type of credit may not demonstrate diverse financial management.
- Recent credit applications: Multiple new applications in a short period can temporarily lower your score due to hard credit checks.
Ways to manage a fair credit score
Improving a fair credit score generally requires consistent effort and good financial habits over time. Here are some strategies you may want to consider:
- Paying bills on time: This can be an impactful behavior. Setting up automatic payments or calendar reminders might help you avoid missing a due date. Timely payments demonstrate reliability to lenders.
- Keeping credit utilization low: Aiming to use less than 30% of your available credit could help you improve your score. For instance, if your credit limit is $1,000, keeping your balance below $300 will help keep your utilization low.
- Checking your credit report regularly: You can obtain a free copy of your credit report from each of the three major credit bureaus annually. If you discover any errors on your report that might have a negative impact, disputing those errors may help increase your credit score.
- Avoiding opening new accounts unnecessarily: While a diverse credit mix can be beneficial, opening too many new accounts in a short period can be detrimental. That’s why it’s generally recommended to limit unnecessary credit applications.
- Considering a secured credit card: If you have limited credit history, a secured credit card could be a good option. You provide a cash deposit that acts as your credit limit, reducing risk for the issuer and helping you build credit with responsible use. Note that Chase does not offer secured credit cards.
- Becoming an authorized user: If a trusted family member with a credit card manages their account responsibly, becoming an authorized user on their account can help you build credit history. Their positive payment history will typically be reflected on your report.
While many factors influence your score, following these tips may help you improve your score over time.
Benefits of moving beyond a fair credit score
Raising your credit score may help you qualify for:
- Lower interest rates on loans
- Higher credit limits or loan amounts
- Top-tier credit cards, including rewards credit cards
- Apartment or home rentals
- Favorable insurance rates
The bottom line
Understanding the financial behaviors that may be contributing to your credit score can be a first step toward improving it over time. By focusing on positive behaviors like making timely payments and managing credit utilization, you can get on a path toward a higher score. Raising your score may help you qualify for better loan terms and more attractive credit card offers.
