Is a 524 Credit Score Bad? What It Means & How to Fix It

A credit score is a numerical representation of an individual’s creditworthiness, indicating their likelihood to manage financial obligations and repay loans on time. Lenders and creditors use these three-digit numbers to assess risk before extending credit, such as for loans, mortgages, or credit cards. A 524 credit score is considered very poor.

Understanding Credit Score Ranges

Credit scores are calculated using models like FICO Score and VantageScore, which range from 300 to 850. A 524 credit score falls into the “Very Poor” or “Poor” category across these models. FICO Scores consider anything below 580 as poor, while VantageScore 3.0 classifies scores between 300 and 499 as “Very Poor” and 500 to 600 as “Poor.”

Credit score ranges are categorized as follows:
Fair: 580-669 (FICO), 601-660 (VantageScore)
Good: 670-739 (FICO), 661-780 (VantageScore)
Very Good: 740-799 (FICO), 781-850 (VantageScore)
Exceptional/Excellent: 800+ (FICO), 781+ (VantageScore)

Impact of a Low Credit Score

A low credit score, such as 524, carries significant real-world implications. A primary consequence is difficulty obtaining new loans, including mortgages, auto loans, and personal loans, as lenders view such scores as indicative of higher risk. Even if approved, borrowers with low scores face substantially higher interest rates, leading to additional costs over the life of a loan. For example, auto loan interest rates can exceed 16% for those with poor credit, compared to rates closer to 4% for individuals with good credit.

Accessing credit cards also becomes challenging, with approvals often limited to secured cards or those with high fees and low credit limits. Insurance premiums, particularly for auto and home policies, can increase as some insurers use credit-based insurance scores to determine rates.

Renting an apartment may also present hurdles, as many landlords conduct credit checks and may require larger security deposits or deny applications. Utility companies might demand deposits, and some employers may review credit history as part of background checks, potentially affecting job prospects.

Factors Influencing Credit Scores

Credit scores are determined by several components, each weighted differently to reflect a borrower’s financial behavior. Payment history is the most impactful factor, accounting for approximately 35% of a FICO Score and up to 40% for VantageScore. Consistent late payments, defaults, or bankruptcies significantly reduce a score. Even a single payment 30 days or more overdue can negatively affect credit scores, with the impact lasting for several years.

The amount of debt owed, specifically the credit utilization ratio, is another major factor, making up 30% of a FICO Score and around 20-21% for VantageScore. This ratio measures the amount of revolving credit used compared to the total available credit. Maintaining high balances, especially near credit limits, indicates a higher risk to lenders.

The length of one’s credit history also contributes, as a longer history of responsible credit management provides more data for assessment. The types of credit accounts, such as a mix of installment loans and revolving credit, also play a role. New credit inquiries, recorded as “hard inquiries” on a credit report, can slightly lower a score, particularly if multiple inquiries occur within a short period.

Steps to Improve Your Credit Score

Improving a low credit score like 524 requires consistent effort. The most impactful step is to ensure all payments are made on time. Payment history carries the heaviest weight in credit scoring models, so establishing a record of prompt payments is important. Setting up automatic payments or reminders can help avoid missed due dates.

Reducing credit card balances is equally important, as it lowers your credit utilization ratio. Financial experts advise keeping this ratio below 30% of your total available credit, but the lower it is, the better for your score. Focus on paying down high-interest debt first while maintaining minimum payments on other accounts.

Avoid opening new credit accounts unnecessarily, as each application results in a hard inquiry that can temporarily lower your score and reduce the average age of your accounts. Regularly reviewing your credit reports from all three major bureaus (Equifax, Experian, and TransUnion) for errors is important. Disputing any inaccuracies can help remove negative marks unfairly impacting your score.

For those with very limited or poor credit history, a secured credit card or a credit-builder loan can help establish positive payment history. These products are designed to help individuals build credit by making regular, on-time payments, which are then reported to credit bureaus.