Is 620 a Bad Credit Score? What It Means & How to Fix It

A credit score is a numerical representation of an individual’s creditworthiness, indicating repayment likelihood. This three-digit number influences financial decisions by lenders and other entities. It provides a snapshot of an individual’s financial behavior based on their credit history. Understanding one’s credit score is important because it influences access to financial products and their terms.

Understanding Credit Score Ranges

Credit scores are calculated using information from credit reports, which are maintained by the three major U.S. credit bureaus: Equifax, Experian, and TransUnion. The most widely used scoring models are FICO Scores and VantageScore, both typically ranging from 300 to 850. Though their calculations differ, both models categorize scores into similar ranges to indicate risk.

For FICO Scores, ranges include Poor (below 580), Fair (580-669), Good (670-739), Very Good (740-799), and Excellent (800-850). VantageScore uses similar categories: Very Poor (300-499), Poor (500-600), Fair (601-660), Good (661-780), and Excellent (781-850). A 620 credit score falls within the “Fair” category for both FICO and VantageScore models. This indicates a higher risk to lenders compared to those with “Good” or “Excellent” scores.

Implications of a 620 Credit Score

A 620 credit score presents challenges for financial products, as lenders perceive it as an elevated risk. This often leads to less favorable terms or loan denials. Lenders view a 620 score as “Fair” or “subprime,” impacting offers.

When applying for significant loans like mortgages, a 620 credit score can make approval difficult and lead to significantly higher interest rates. For example, a difference of 100-200 points in credit score can translate to thousands of dollars in additional interest paid over the life of a mortgage. For auto loans, a 620 score means higher annual percentage rates (APRs) compared to stronger credit. A $25,000 auto loan paid over 48 months could cost thousands more in interest with a lower score. Personal loans may also be harder to secure, and if approved, will come with elevated interest rates, increasing the total cost.

Credit card access is also affected by a 620 score. Available cards often come with lower credit limits, higher interest rates, and annual fees. This limits purchasing power and makes managing expenses or building credit history more challenging. Maintaining a high credit utilization ratio, which is common with low limits, can further hinder score improvement.

Beyond traditional lending, a 620 credit score influences other aspects of daily life. Landlords may review credit reports to assess financial responsibility, and a lower score could lead to denial or require a larger security deposit. Utility companies may also check credit scores and require a deposit to establish service. Insurance providers, including those for auto and home policies, often use credit information to determine premiums, resulting in higher costs.

Strategies for Improving a 620 Credit Score

Improving a 620 credit score involves consistent financial habits focused on factors influencing score calculation. Payment history is the most significant component, accounting for approximately 35% to 41% of a FICO or VantageScore. Consistently making all payments on time for credit cards, loans, and other financial obligations is crucial. Even a single missed payment can negatively affect a score.

Credit utilization, the amount of credit used compared to the total available credit, is another important factor, making up 20% to 30% of a score. Keeping credit card balances low, ideally below 30% of the credit limit on each card and across all accounts, can help improve this ratio. Paying down existing debt or requesting a credit limit increase (if managed responsibly) can lower this percentage. The length of credit history also contributes, making older accounts more beneficial.

New credit accounts can temporarily lower a score due to hard inquiries, accounting for about 10% of a FICO score. Avoid opening multiple new accounts in a short period, as this signals increased risk to lenders. A diverse credit mix, including revolving accounts and installment loans, can also be beneficial, accounting for about 10% of a score. However, taking on new debt solely for this purpose is not advisable.

Regularly check credit reports from Equifax, Experian, and TransUnion. You are entitled to a free copy of your credit report from each bureau annually. Review these reports for inaccuracies, such as incorrect late payments or accounts that do not belong to you, and dispute any errors to ensure the score accurately reflects financial behavior.