636 Credit Score: Is It Good or Bad?

A credit score is a numerical representation of an individual’s creditworthiness, typically a three-digit number between 300 and 850. Lenders utilize this score to assess the likelihood of a borrower repaying borrowed funds on time. It reflects a person’s credit history, including active accounts, total debt levels, and repayment behavior. A 636 credit score generally falls into the “fair” category.

Credit Score Ranges

Credit scores are broadly categorized into several ranges, each signifying a different level of credit risk to lenders. While specific thresholds vary between models like FICO and VantageScore, classifications are consistent.

A score from 800 to 850 is typically considered excellent, reflecting low credit risk. Scores between 740 and 799 are often deemed very good, indicating strong credit history, while those ranging from 670 and 739 are classified as good, viewed favorably by lenders.

A 636 credit score falls within the “fair” range, which commonly spans from 580 to 669. This category suggests past credit challenges or limited credit history. Scores below 580 are typically considered poor, indicating higher risk.

Practical Impact of a 636 Score

Possessing a 636 credit score can lead to limitations and increased costs when seeking new credit. Lenders often view scores in the fair range as having unfavorable credit, potentially leading to declined applications or less desirable terms. While some lenders specializing in “subprime” lending may approve applications, they typically impose higher interest rates and fees to offset the increased risk.

For instance, obtaining a mortgage with a 636 score might be possible, but it will likely come with a higher interest rate compared to someone with a good or excellent score. This difference can amount to thousands of dollars over a loan’s life.

Similarly, auto loans and credit cards will generally have higher Annual Percentage Rates (APRs), potentially 17% to 20% or more for credit cards, making borrowing more expensive. Unsecured personal loans may also be challenging to secure with favorable terms, often carrying high interest rates or origination fees.

How Credit Scores Are Calculated

Credit scores are derived from information contained in an individual’s credit report, with various factors contributing. The most common scoring models, such as FICO, weigh these factors differently.

• Payment history carries the most significant weight, typically accounting for about 35% of the score. This factor assesses whether past credit accounts have been paid on time, including any instances of late payments, bankruptcies, or collections.
• The amount owed, also known as credit utilization, makes up approximately 30% of the score. This considers the total debt relative to the available credit, particularly on revolving accounts like credit cards. A lower utilization rate, ideally below 30% of available credit, is generally viewed more positively.
• The length of credit history contributes about 15%, factoring in the age of the oldest and newest accounts, as well as the average age of all accounts.
• New credit accounts for roughly 10% of the score, reflecting recent credit applications and newly opened accounts. Multiple hard inquiries or opening several new accounts in a short period can temporarily lower a score.
• The credit mix, representing the diversity of credit types (e.g., credit cards, installment loans, mortgages), accounts for the remaining 10%.

Improving Your Credit Score

Improving a credit score involves consistent and disciplined financial habits. The most impactful action is making all payments on time. Even a single late payment can negatively affect your score. Setting up automatic payments for bills can help ensure timely remittances.

Reducing outstanding balances on revolving credit accounts, particularly credit cards, is another effective strategy. Aim to keep credit utilization below 30% of your available credit limit. Paying down the highest-interest credit card balances first can accelerate this process.

Maintaining older credit accounts, even if they are paid off, contributes positively to the length of credit history. Closing old accounts can shorten the average age of accounts and potentially lower the score.

Limiting new credit applications is also advisable, as each application results in a hard inquiry that can temporarily decrease the score. Regularly reviewing credit reports from the three major credit bureaus for errors is important, as inaccuracies can negatively impact the score; consumers are entitled to a free report annually from each bureau.