652 Credit Score: Is it Good or Bad?

Credit scores numerically represent an individual’s creditworthiness, providing lenders a quick risk assessment. Ranging from 300 to 850, these three-digit numbers significantly influence access to financial products. Lenders use scores to determine repayment likelihood, impacting loan approvals, interest rates, and borrowing terms. Understanding credit scores is important for effective financial management.

Understanding Credit Score Ranges

Credit scores are primarily generated by two widely used models: FICO and VantageScore, both using a 300 to 850 scale. FICO scores categorize credit into ranges: Exceptional (800-850), Very Good (740-799), Good (670-739), Fair (580-669), and Poor (300-579). VantageScore classifies scores as Excellent (781-850), Good (661-780), Fair (601-660), Poor (500-600), and Very Poor (300-499). A 652 credit score falls into the “Fair” category for both models.

A “Fair” credit score generally indicates a moderate level of risk to lenders. While not poor, it is below the national average and suggests some past credit management challenges. Borrowers in this range may find their options for loans and credit cards more limited. Furthermore, credit extended often comes with less favorable terms, reflecting the increased perceived risk.

Implications of a 652 Credit Score

A 652 credit score can have distinct implications for accessing various financial products. While credit may be obtainable, it typically involves higher costs and less advantageous terms compared to those with higher scores. Lenders view this score as indicating a higher risk, which influences approval odds and the overall expense of borrowing.

For mortgages, a 652 score often meets minimum requirements for conventional loans (typically 620) and FHA loans (580), allowing for homeownership. However, borrowers can expect higher interest rates than those with stronger credit, potentially adding thousands of dollars to the total cost of the loan over its lifetime. For instance, a $300,000 mortgage might carry an average interest rate significantly higher than for someone with exceptional credit, leading to increased monthly payments and higher private mortgage insurance (PMI) premiums.

Accessing an auto loan with a 652 credit score is generally possible, though it also comes with elevated interest rates. For new cars, rates for individuals in the “non-prime” range (601-660) could be around 9.83%, while used car rates might climb to 13.92%. This contrasts sharply with rates for borrowers in higher credit tiers, meaning a 652 score results in a more expensive financing arrangement over the loan’s term. Personal loans are similarly accessible, but at higher Annual Percentage Rates (APRs) and potentially with additional fees.

Regarding credit cards, a 652 score typically allows for approval, often for basic or secured credit cards. These cards may feature high variable APRs, sometimes around 20% or more, and could include annual fees. Credit limits offered are also generally lower until a consistent history of on-time payments is established.

Strategies for Credit Score Improvement

Timely Payments

Ensuring timely payments on all bills is impactful. Payment history accounts for a substantial portion of a FICO score; making at least the minimum payment by the due date is important. Automatic payments prevent missed due dates, which negatively affect credit.

Credit Utilization

Managing credit utilization is important, representing how much of your available credit you are using. Keeping this ratio below 30% is advised, as high utilization negatively impacts scores. This ratio is calculated by dividing total outstanding balances by total available credit across all revolving accounts. Paying down existing debt effectively lowers this ratio.

Checking Credit Reports

Regularly checking credit reports for errors is advised. Consumers can obtain free annual reports from Equifax, Experian, and TransUnion. Reviewing reports for inaccuracies and promptly disputing incorrect information helps ensure the score accurately reflects credit behavior.

Credit History and New Applications

Maintaining a long credit history and being cautious about new credit applications contributes to a healthier score. The length of time accounts have been open influences the credit score, so keeping older accounts active is beneficial. Each new credit application results in a hard inquiry, which can temporarily lower a score. Apply for new credit only when necessary and avoid opening multiple accounts within a short period.