Is 653 a Good Credit Score & How to Improve It

A credit score is a numerical representation of an individual’s creditworthiness, used by lenders to evaluate the risk of extending credit. Understanding your credit score, including what a 653 score signifies, is important for managing your financial life.

Understanding Credit Score Ranges

Credit scores range from 300 to 850, with higher scores indicating lower risk. FICO and VantageScore are two widely used models. FICO categorizes scores as Poor (300-579), Fair (580-669), Good (670-739), Very Good (740-799), and Excellent (800-850). VantageScore defines Fair between 601 and 660, and Good from 661 to 780.

A 653 credit score falls within the “Fair” category for both FICO and VantageScore. This indicates you are a moderate-risk borrower. While obtaining new credit may be possible, it often comes with less favorable terms, such as higher interest rates. Moving into the “Good” range, which starts at 670 for FICO or 661 for VantageScore, can unlock more competitive rates and terms.

What Affects Your Credit Score

Your credit score is derived from information in your credit reports, compiled by Equifax, Experian, and TransUnion. This data is organized into several key categories, each contributing a different percentage to the overall score.

Payment history is the most significant factor, accounting for about 35% of a FICO Score. This reflects your record of making on-time payments for all credit accounts. Amounts owed, or credit utilization, is the second largest factor, making up approximately 30% of your score. This measures how much of your available credit you are currently using; lower utilization is more favorable.

The length of your credit history contributes around 15% to your score, considering how long your accounts have been established. A longer history of responsible credit management is seen positively. New credit, representing about 10% of the score, looks at recently opened accounts and hard inquiries. Opening multiple new accounts in a short period can indicate higher risk. Credit mix, also contributing about 10%, assesses the diversity of your credit accounts, such as revolving credit and installment loans.

How Credit Scores Are Used

Credit scores impact various aspects of an individual’s financial life. Lenders use these scores to assess risk and determine credit terms.

When applying for mortgages, auto loans, or personal loans, your credit score directly affects approval and interest rates. A higher score can result in significantly lower interest rates, saving thousands of dollars over the loan’s lifetime. Credit card issuers also use scores to approve applications, set credit limits, and determine interest rates. Beyond traditional lending, credit scores can impact rental applications, as landlords review them to evaluate financial reliability.

Insurance companies in many states use credit-based insurance scores to help set premiums for auto and home insurance policies. Research indicates a correlation between lower credit scores and a higher likelihood of filing insurance claims, leading insurers to adjust pricing. Utility providers may check credit scores when setting up new service connections. In some cases, employers may review credit reports (where permissible by law) as part of their hiring process.

Steps to Improve Your Credit Score

Improving a credit score like 653 involves consistent positive financial behaviors. These steps address the primary factors that influence credit scoring models.

Consistently paying all bills on time is the most impactful step. Setting up automatic payments can help ensure minimum payments are made by their due dates. Reducing credit card balances and maintaining low credit utilization is another significant strategy. Aim to keep the amount of credit used below 30% of your available credit limit, or ideally even lower, across all revolving accounts.

Avoiding opening too many new credit accounts in a short period helps, as new applications can temporarily lower your score. Keeping older credit accounts open, even with a zero balance, can positively impact the length of your credit history. Regularly checking your credit reports from all three major bureaus for errors and disputing inaccuracies can prevent incorrect information from negatively affecting your score. For those with limited credit history or past difficulties, considering a secured credit card or a credit-builder loan can be effective ways to establish or rebuild positive credit.