Credit scores try to predict the likelihood you’ll pay back debt. They’re based on factors that make up your creditworthiness, such as credit history, credit mix or credit utilization. In the case of a fair credit score, lenders may believe you’re less likely to pay back money you’ve borrowed than someone with a good or excellent credit score.
Let’s look at how you might receive a fair credit score, how it may affect you as well and what steps you can take to improve that score.
What’s considered a fair credit score?
What’s considered a fair credit score will depend on the credit score model. Credit rating companies, such as FICO®, calculate credit scores by using credit report data that weigh various creditworthiness factors such as the average age of accounts, outstanding debts and payment history.
Specific score models may weigh some factors more or less than others. For example, one credit score model may weigh payment history and credit utilization more than the average age of accounts and credit mix.
Because of these score models, different credit scores may have different ranges for what’s considered a fair score, so it’s always important to know what credit score model is used by an issuer when applying for a credit card or loan. FICO® Scores generally considers 580 to 669 to be fair.
Reasons you might have a fair credit score
Although scoring models may rate you a fair credit score based on different factors, these models will typically use criteria such as:
- Payment History: How consistently you make on-time debt payments
- Credit Utilization: The percentage of your total available credit you’re using
- Credit Mix: The diversity of credit accounts you have open
- Credit History: The length of time your credit accounts have been open
If you find out you have a fair credit score, it can help to examine these factors and consider how they might be affecting your current creditworthiness.
Fair vs. good credit score: what is the difference?
Both fair and good credit scores attempt to assess how risky you are as a borrower, with a good credit score meaning you are more likely to pay back debt than a borrower with a fair credit score.
Someone with a fair credit score may have a harder time finding their ideal interest rates or credit limits when applying for credit cards than someone with a good credit score. They may also be less likely to get approved for financial products like personal loans, credit cards or mortgages.
How can you improve from a fair to a good credit score?
Improving from a fair to a good credit score requires patience and proper strategy. It’s possible to improve your credit score if you follow the right steps.
Pay down your outstanding credit card balances
Paying off your existing credit card balances can help improve your credit score. Check the balances on your credit cards, figure out what you owe overall and come up with a plan to pay these debts off.
When you pay down your credit cards, you will lower the amount of available credit you’re using, which improves your credit utilization ratio, a factor in determining credit scores.
Use a credit card to build credit
You can build credit over time by aiming to use your card responsibly.
Responsible credit card usage involves making all your minimum credit card payments by the due date and keeping your balances low (a good rule is to keep your credit utilization below 30%). These actions can keep your credit utilization low and continue to build your repayment history, which can help you continue to improve your creditworthiness.
Don’t apply for too many new credit cards and loans at once
Applying for a new credit card or loan can trigger a hard inquiry into your credit file, which can lower your credit score. While hard inquiries don’t hurt your score too much, they can add up over time if you’re frequently applying for new credit cards and loans. Many hard inquiries at once can also signal to lenders that you’re trying to take on more new debt from credit cards and loans than you can manage.
Start building credit with a Citi® credit card
Secured cards like the Citi® Secured Mastercard® and balance transfer cards like the Citi® Diamond Preferred® Card can be great options for users looking to build credit.
The Citi® Secured Mastercard® can be a good option for customers with little or no credit history. If you are approved for this secured card, a security deposit is required for the amount of your credit limit.
If you want to transfer high-interest balances from your other cards, the Citi® Diamond Preferred® Card could be a good option since it allows you to take advantage of a low introductory APR on balance transfers for a certain period of time. You can also learn how select Citi cards enable its cardmembers to view their FICO® Score for free and keep track of how their score is changing over time.
Disclosures:
FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries. Citi and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Citi and Fair Isaac do not provide ‘credit repair’ services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history or credit rating.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
