Is a 595 Credit Score Good? How to Improve It

A credit score is a numerical summary of an individual’s creditworthiness, typically a three-digit number ranging from 300 to 850. This score is a prediction of how likely someone is to repay a loan and make payments on time. Creditors and lenders rely on credit scores as a significant factor when evaluating applications for loans, credit cards, and other financial products. A higher score generally indicates a lower risk to lenders and can lead to more favorable terms for financial agreements.

Understanding Credit Score Ranges

Credit scores generally range from 300 to 850, categorized by models like FICO and VantageScore. A 595 credit score typically falls into FICO’s “Fair” category (580-669) and VantageScore’s “Subprime” (300-600) or “Near Prime” (601-660) categories. This score is below the national average and presents challenges when seeking credit from most lenders.

Implications of a 595 Credit Score

A 595 credit score leads to financial challenges, impacting credit access and cost. Lenders may decline loan or mortgage applications due to higher risk. If approved, individuals with a 595 score face higher interest rates and less favorable terms, increasing total cost.

Credit card access is limited with a 595 score, often restricting options to secured or credit-rebuilding cards. These cards come with high annual fees, lower credit limits, and elevated interest rates. Secured cards require an upfront cash deposit, limiting the available credit line.

A lower credit score can influence other aspects of personal finance. Landlords may require larger security deposits or deny rental applications, and utility companies may demand deposits for services like electricity or gas if a credit score indicates higher risk. Some insurance providers use credit-based scores for auto and homeowners insurance premiums, resulting in higher costs for those with lower scores.

Key Factors in Credit Score Calculation

Credit scores are derived from information within an individual’s credit reports, with various components contributing to the overall value.

Payment History

The most influential factor is payment history, which accounts for 35% of a FICO score and up to 40% of a VantageScore. It evaluates on-time bill payments; late payments or defaults significantly reduce a score.

Credit Utilization

Credit utilization, the ratio of credit used to available credit, is the second most important factor, accounting for 30% of FICO and 20% of VantageScore. Lenders prefer a credit utilization ratio below 30%, as exceeding this indicates over-reliance on credit and negatively impacts a score.

Length of Credit History

The length of credit history, considering account age and average age of all accounts, accounts for 15% of a FICO score and around 20% for VantageScore. A longer history of responsible credit management is viewed positively.

Credit Mix

Credit mix, reflecting varied credit accounts (e.g., installment loans, credit cards), plays a role, contributing around 10% to a FICO score. Though not heavily weighted, a diverse mix demonstrates experience managing different debt types.

New Credit

New credit, including recent applications and newly opened accounts, impacts a score, accounting for about 10% of a FICO score. Each “hard inquiry” from a new credit application can temporarily reduce a score, though the impact is minor and short-lived.

Strategies for Credit Score Improvement

Improving a 595 credit score requires consistent financial habits focused on credit factors.

Make On-Time Payments

Make all bill payments on time, as payment history carries the most weight in credit scoring models. Automatic payments or reminders can ensure minimum payments are met by due dates.

Reduce Credit Utilization

Reducing outstanding credit card balances lowers credit utilization, impacting scores. Keep total credit card balances below 30% of available limits; lower is better.

Limit New Credit Applications

Limiting new credit applications can help mitigate the impact of hard inquiries on a credit report, as each application can slightly reduce a score.

Check Credit Reports for Errors

Regularly check credit reports for errors; consumers can obtain free annual copies from the three major credit bureaus. Disputing inaccuracies can remove negative information suppressing a score.

Consider Secured Cards or Credit-Builder Loans

For limited credit history, secured credit cards or credit-builder loans can be beneficial. These products establish positive payment history, as lenders report on-time payments to credit bureaus.

Maintain Older Accounts

Maintain older credit accounts, even if inactive, to positively impact credit history length. Avoid closing old, positive accounts to preserve valuable historical data.

Become an Authorized User

Becoming an authorized user on an account with a strong payment history and low utilization can help, provided the primary account holder maintains responsible credit habits.