Fair credit is when your score is in-between the range of 620 to 659. Most FICO scores use a 300-850 credit score range. However, even if you fall within the 620 and 659 range, lenders make their own decision on what is considered fair credit to them. This is because some lenders and creditors might have higher standards than others.
Some might believe that “fair credit” is similar to “average credit” and use those two terms interchangeably; however, the average American does have good credit – meaning fair credit is technically not the same as average credit.
Is Fair Credit Ideal
Fair credit is definitely better than poor credit; however, it’s not ideal. Lenders will give those with a higher credit score more favorable terms. You may still get approval for loans and such, but the terms may not offer the best agreement. Technically, fair credit is considered “subprime borrowers”, this means that this is not a score that is typically favored.
Difference Between Good and Fair Credit
Although fair credit is not considered “poor” a good credit score is more attractive to lenders and creditors. The best offers are presented to those that display responsibility and lenders rely heavily on the information presented within your credit history and score to come to a decision. Having good credit will give you more opportunities than you would with fair credit.
A good credit means:
- Getting approved for loans and credit cards
- Lenders are more trusting of those that have display responsible financial history
- Chances of renting or leasing are more likely
- When you’re in the process of getting approval for apartments, renters will take a look at your credit score to determine whether or not you have a good history with monthly payments.
- A higher chance of employment
- With your permission, some employers may want to review your credit history to ensure you’re financially responsible.
- Your interest rate will be lower, resulting in lower monthly payments
- If lenders and creditors trust your ability to pay off debt timely, then your interest rate will be significantly lower since there is less risk.
- You’ll receive more credit card rewards
- There are more perks for those that display good financial habits
Factors that Might Lower Your Score
Keeping up with your credit score might not be easy if you aren’t in the habit of constantly checking your financial status. Start by being aware of the factors that might make your score plummet. Keeping your credit score stable isn’t easy if you don’t know the major factors that can harm you.
- Procrastinating on Payments: Be sure to always make your payments in full and on time. This is a major factor that can hinder your credit more than you think. About 35% of your FICO score is based on your payment history alone. This applies to retail accounts, credit cards, installment loans, and even your mortgage.
- High Credit Card Usage: This major factor is just as important as making your payments on time. It is also about 30% of what your score is based on. Having a very high percentage may depict you as not being able to balance your expenses or responsibly pay back your debt. Credit card utilization may be tricky so do some research on which cards benefit you the most.
- Excessive Requests for New Credit Lines: Trying to open up new lines of credit all at once may appear desperate. The number of recently opened credit lines reflects when credit inquiries were made and how long it’s been since other accounts have been opened. Be aware of how this activity may appear.
Improving Fair Credit
Improving your credit won’t happen overnight, it is going to take time and dedication. By consistently making good financial decisions, your credit will be sure to improve. It’s important to always be on track and avoid falling into bad habits. Below is a list of steps you can take in order to improve your credits:
- Make Payments On-Time: Avoid making any late payments. Making payments on time is crucial to raising your score and proving you’re financially responsible. If you’re unsure of which payments to make first, start with high-interest rates. If you struggle with making payments on-time consider automating credit card payments to ensure that you don’t miss a payment again.
- Review Your Credit Report: Your credit score is determined by the information within your credit report. It’s important to ensure that everything in your credit report is accurate. One mistake could heavily impact your overall score. You’re entitled to one free credit report from each of the credit reporting agencies (TransUnion, Equifax, and Experian) each year.
- Avoid Closing Out Existing Accounts: Try to improve the length of your credit history by keeping credit cards open. Your credit history influences your credit score greatly. It’s important to consider this before closing out old accounts.
Keeping your credit score good instead of fair can have its benefits. You may be eligible for a far wider variety of loans and benefits. Keep in mind that whenever you have a higher credit score better rates and credit cards become available. Try your best to stay out of the fair zone and transition into the good. Open more doors by creating trustworthiness with your lenders, this could be the boost you need to enhance your life choices.