Is 653 a Bad Credit Score? What It Means & How to Improve

A credit score is a numerical representation of an individual’s creditworthiness. This three-digit number, ranging from 300 to 850, helps financial institutions assess the likelihood of a person repaying borrowed money. Lenders, insurers, and even landlords use these scores to make decisions about extending credit, setting interest rates, or approving applications.

Understanding Credit Score Scales

Credit scoring models, primarily FICO and VantageScore, categorize scores into distinct ranges. While slight variations exist, they use a scale from 300 to 850. For FICO scores, 580-669 is “Fair,” 670 and above is “Good,” 740-799 is “Very Good,” and 800 and above is “Exceptional.”

VantageScore models define ranges, with 601-660 falling into a “Near Prime” or “Fair” category. Scores from 661-780 are considered “Prime” or “Good.” A 653 credit score falls within the “Fair” range for both systems. This indicates lenders may perceive you as a moderate risk borrower.

Access to Credit with a 653 Score

A 653 credit score means you can access financial products, but terms may not be favorable. Lenders view individuals with scores in this range as moderate-risk borrowers. You might encounter higher interest rates and more stringent borrowing conditions compared to those with higher scores.

For mortgages, a 653 score might allow approval, though it could result in higher interest rates. While some conventional mortgage loans accept scores as low as 620, ideal rates are reserved for scores of 760 or higher. Auto loans are possible, but anticipate interest rates higher than those offered to borrowers with good or excellent credit. Personal loans are also accessible, often through lenders specializing in fair credit, but these come with elevated interest rates.

For credit cards, a 653 score can secure approval for standard cards. However, these may feature higher annual percentage rates (APRs) and lower credit limits. Beyond traditional lending, your credit score influences other aspects of your financial life. Landlords review credit scores during rental applications, requiring larger security deposits or scrutinizing applications more closely, though approval is common. Insurance providers use credit-based insurance scores, which can lead to higher premiums for auto, home, and business insurance if your credit score is lower.

Key Components of Credit Scores

Credit scores are calculations derived from several factors within your credit report. Payment history holds the most weight, accounting for 35% of a FICO score. This assesses whether you have consistently made payments on time; late or missed payments significantly impact your score.

Another substantial component, about 30% of your score, is the amount owed, also known as credit utilization. This factor considers how much of your available credit you are using, with lower utilization rates viewed more favorably. The length of your credit history contributes 15% to your score, reflecting how long your accounts have been established.

New credit, including recent applications and newly opened accounts, accounts for 10% of the score. Frequent applications for new credit within a short period suggest increased risk. Finally, your credit mix (types of credit accounts like cards or installment loans) makes up the remaining 10%.

Steps to Improve Your Credit Score

Improving a 653 credit score involves consistent financial discipline and strategic actions. The most impactful step is to ensure all bills are paid on time. Payment history is the largest factor, so even a single late payment negatively affects your score. Setting up automatic payments helps maintain a reliable payment record.

Reducing your credit utilization ratio is another effective strategy. Keep the amount of credit you are using low relative to your total available credit, ideally below 30%. Paying down existing credit card balances quickly lowers this ratio and positively impacts your score. Avoid opening too many new credit accounts simultaneously, as each new application results in a hard inquiry that temporarily lowers your score.

Regularly checking your credit reports from the three major credit bureaus (Equifax, Experian, and TransUnion) is beneficial. Dispute any inaccuracies or fraudulent activity found on these reports, which could unfairly lower your score. Maintaining older credit accounts in good standing also helps, as the length of your credit history is a contributing factor. For individuals with limited credit history or those looking to rebuild, secured credit cards or credit-builder loans serve as valuable tools. Secured cards require a security deposit that acts as your credit limit, while credit-builder loans involve making payments into a savings account before accessing the funds, with both reporting payment activity to credit bureaus.