Is 624 a Bad Credit Score & How to Improve It

A credit score is a numerical representation that helps lenders assess an individual’s financial reliability. It summarizes a person’s creditworthiness, indicating the likelihood they will repay borrowed money on time. This three-digit number influences various financial aspects, from securing loans to obtaining favorable interest rates. Understanding this score is important for navigating personal finances and making informed decisions.

Understanding Credit Score Ranges

Credit scoring models, primarily FICO and VantageScore, produce scores typically ranging from 300 to 850. FICO Scores generally categorize scores into “poor” (300-579), “fair” (580-669), “good” (670-739), “very good” (740-799), and “exceptional” (800-850). VantageScore 3.0 and 4.0 use similar classifications: “very poor” (300-499), “poor” (500-600), “fair” (601-660), “good” (661-780), and “excellent” (781-850). A 624 credit score falls into the “fair” category for both FICO and VantageScore models. This score is below the national average and suggests moderate creditworthiness, falling short of the “good” or “excellent” ranges that offer better terms.

Implications of a 624 Score

A 624 credit score, categorized as “fair,” carries several practical implications across various financial areas, often leading to less favorable terms compared to individuals with higher scores. While loan approvals may still be possible, borrowers are typically viewed as higher risk. This can result in higher interest rates on mortgages, auto loans, and personal loans, increasing the total cost of borrowing significantly over the loan’s duration. For instance, an auto loan borrower with a 624 FICO score might face annual percentage rates (APRs) around 10% to 20% or more, whereas a borrower with strong credit could secure rates below 5%.

Access to credit cards is also affected, with individuals often limited to secured cards or those with higher fees and interest rates. These cards might require an upfront security deposit equal to the credit limit, and their APRs can be as high as 25% or more.

Beyond lending, a 624 score can impact housing and insurance. Landlords may view a lower score as a higher risk, potentially requiring a larger security deposit or even leading to denial of a rental application. Insurance premiums, particularly for auto and home policies, can also be higher for individuals with lower credit scores, as insurers often use credit-based insurance scores to assess risk. Utility companies might also demand higher security deposits for services like electricity, gas, or water from applicants with fair credit scores.

Key Factors Determining Your Score

Credit scores are calculated based on several factors. Payment history is the most significant, typically accounting for about 35% of a FICO Score and around 40% of a VantageScore. This category reflects whether bills are paid on time, and even a single late payment can negatively impact the score.

Credit utilization, which is the amount of credit used relative to the total available credit, is another major component, making up about 30% of a FICO Score and a significant portion of a VantageScore. Keeping balances low, ideally below 30% of the credit limit, signals responsible credit management.

The length of credit history, including the age of the oldest account and the average age of all accounts, contributes about 15% to a FICO Score. A longer history of responsible credit use is generally viewed favorably. The types of credit used, also known as credit mix, accounts for approximately 10% of a FICO Score. This factor considers a healthy mix of revolving credit (like credit cards) and installment loans (such as mortgages or auto loans). Finally, new credit, including recent applications and newly opened accounts, makes up about 10% of a FICO Score. Numerous recent credit inquiries can indicate higher risk and may temporarily lower a score.

Steps to Improve Your Credit Score

Improving a 624 credit score involves consistent effort focused on the factors that influence it. Prioritizing on-time payments is paramount, as payment history is the most influential factor. Setting up automatic payments for all bills can help prevent negative marks on a credit report. Addressing any past-due accounts promptly is also important, as the impact of negative information lessens over time once payments become current.

Reducing credit card balances to lower credit utilization is another effective strategy. Aiming to keep credit card balances below 30% of the available credit limit can positively impact the score. This demonstrates that credit is being managed responsibly and not overextended. Keeping older credit accounts open, even if not actively used, helps maintain a longer credit history.

Responsible diversification of credit types can also contribute to improvement. Having a mix of revolving and installment accounts, and managing them well, shows a broader ability to handle different forms of debt. However, it is not advisable to open new accounts solely for this purpose. Avoiding unnecessary new credit applications is important because each application typically results in a hard inquiry that can temporarily lower the score. Regularly checking credit reports for errors is a proactive step, as inaccuracies can negatively affect a score and should be disputed.