How Bad Is a 570 Credit Score & How to Fix It?

A credit score is a numerical representation of an individual’s creditworthiness, indicating the likelihood of repaying borrowed funds on time. These three-digit numbers play a fundamental role in personal finance by providing lenders with insights into a borrower’s financial reliability. Credit scores are derived from information within an individual’s credit reports, which document their history with various credit accounts. The scores help lenders make informed decisions regarding credit applications and the terms offered.

What a 570 Credit Score Means

A 570 credit score signals a higher risk to potential lenders. Major credit scoring models, such as FICO Score and VantageScore, typically range from 300 to 850. Under the FICO model, 570 is categorized as “Poor” (300-579). Under the VantageScore model, 570 falls within the “Very Poor” or “Poor” range (300-600). This classification suggests consumers with a 570 score may have experienced challenges managing credit, such as late payments or high debt levels, and lenders view such scores as an indication of increased risk, influencing their willingness to extend credit and the terms offered.

How a 570 Credit Score Affects You

A 570 credit score significantly influences financial opportunities, leading to more restrictive terms and higher costs. Lenders use credit scores to evaluate risk, and a lower score suggests a higher probability of default.

Accessing New Credit and Loans

Accessing new credit and loans becomes challenging with a 570 credit score. Individuals may find it difficult to obtain approvals for mortgages, auto loans, or personal loans. If approved, interest rates will be substantially higher due to increased risk. This results in thousands of dollars more paid over the loan’s life. For instance, a higher interest rate on a car loan means larger monthly payments and a greater total cost.

Credit Card Options

Credit card options are limited for those with a 570 score. Mainstream credit cards are generally inaccessible. Options include secured credit cards, which require an upfront cash deposit as collateral, or cards with higher annual fees and lower credit limits. These cards help rebuild credit.

Renting and Housing

Renting and housing can also be affected by a low credit score. Landlords often check credit reports as part of tenant screening to assess financial responsibility. A 570 score may lead to landlords requiring a higher security deposit, or in some cases, denial of a rental application. Some landlords might require a co-signer.

Insurance Premiums

Insurance premiums, particularly for auto and home insurance, can also be impacted. Many insurance providers use credit-based insurance scores to determine premiums. Lower credit scores correlate with a higher likelihood of filing insurance claims, leading insurers to charge higher rates. This means a 570 credit score could translate into higher monthly or annual insurance costs.

Utility Providers

Utility providers may also require larger security deposits. Companies offering services like electricity, gas, internet, or mobile phone plans often review credit history to assess a new customer’s payment risk. A low credit score can signal a higher risk of late or missed payments, prompting the utility company to request a deposit before initiating service.

Steps to Improve Your Credit Score

Improving a 570 credit score involves responsible financial behaviors.

Reviewing Credit Reports

Regularly reviewing credit reports is a primary step. Consumers are entitled to a free copy of their credit report from each of the three major credit bureaus—Experian, Equifax, and TransUnion—through AnnualCreditReport.com. This review allows for the identification and dispute of inaccuracies that can negatively affect a score. Errors found, such as incorrect personal information or accounts that do not belong to you, should be disputed with the credit bureau.

Payment History

Payment history is the most significant factor in credit scoring models, accounting for approximately 35% of a FICO Score and up to 40% of a VantageScore. Making all payments on time is important for credit improvement. Even a single late payment can negatively impact a score, while a steady record of on-time payments demonstrates financial reliability. Setting up automatic payments helps ensure bills are paid by their due dates.

Managing Credit Utilization

Managing credit utilization is important. This refers to the amount of credit used relative to the total available credit. Keeping credit utilization below 30% positively influences a score. For example, if an individual has a total credit limit of $1,000, keeping balances below $300 across all credit cards helps maintain a favorable ratio. Paying down existing credit card balances can quickly reduce this ratio and improve a score.

Addressing Negative Items

Addressing negative items on a credit report is necessary. While accurate negative information cannot be removed, its impact lessens over time. For past-due accounts or collections, contacting creditors to arrange payment plans or settlements can prevent further negative reporting.

Strategically Building New Credit

Strategically building new credit aids improvement. Options like secured credit cards or credit-builder loans are designed for individuals with limited or poor credit history. A secured credit card requires a cash deposit that serves as the credit limit, while a credit-builder loan involves making regular payments into a savings account before receiving the loan amount. Both types of accounts report payment activity to credit bureaus, helping to establish a positive payment history.

Avoiding Too Many New Accounts

Avoiding opening too many new credit accounts in a short period is wise. Each new credit application results in a “hard inquiry” on a credit report, which causes a small, temporary dip in a credit score. Multiple inquiries over a short timeframe signal higher risk to lenders. Maintaining older, positive credit accounts open, even if not frequently used, contributes to a longer credit history. A longer credit history demonstrates established financial responsibility and impacts a score.