Is a 628 Credit Score Good? What You Can Get With It
Unpack your 628 credit score: understand its significance, its effect on financial opportunities, and how to gauge your credit health.
A credit score serves as a numerical representation of an individual’s creditworthiness. It provides lenders with a quick assessment of the risk involved in extending credit. This three-digit number fundamentally influences various aspects of personal finance, from securing loans to determining interest rates and other financial terms. Understanding how this score is calculated and its implications is important for managing one’s financial standing.
Understanding Credit Score Ranges
Credit scores are generated using models such as FICO and VantageScore, both ranging from 300 to 850. These models categorize scores into tiers indicating varying levels of credit risk. FICO Scores range: Poor (300-579), Fair (580-669), Good (670-739), Very Good (740-799), and Excellent (800-850). VantageScore also uses a 300-850 scale, with categories such as Very Poor (300-499), Poor (500-600), Fair (601-660), Good (661-780), and Excellent (781-850).
A 628 credit score falls within the “Fair” category for both FICO (580-669) and VantageScore (601-660). This score often positions an individual as a “subprime” borrower, indicating a higher risk of default. Lenders may offer less favorable terms or stricter requirements compared to those with higher credit scores.
Implications of a 628 Credit Score
A 628 credit score impacts various financial products and services, often resulting in less advantageous terms. For loan approvals, a 628 score may not prevent financing, but it typically leads to higher costs. Conventional mortgages often require a minimum credit score around 620, making a 628 score eligible. Borrowers with this score can expect significantly higher interest rates, potentially around 7.8% compared to 6.2% for top-tier borrowers, leading to substantially more interest paid over the loan’s lifetime. Government-backed loans like FHA, VA, and USDA loans may also be accessible, often with lower minimum score requirements, though terms will still reflect the perceived risk.
Auto loans also reflect the impact of a 628 score with higher interest rates. Individuals in the non-prime category (601-660) might face rates around 9.83% for new cars and 13.92% for used cars, significantly higher than rates for prime borrowers. Personal loans will similarly come with elevated Annual Percentage Rates (APRs) and potentially smaller loan amounts due to increased risk for lenders. Lenders view a 628 score as an indicator of a greater likelihood of missed payments, which translates to more expensive borrowing.
A 628 credit score also affects access to credit cards. While some credit card options may be available, they are often secured credit cards requiring an upfront cash deposit as collateral, or cards with higher annual fees and lower credit limits. These cards carry higher interest rates, making carrying a balance more costly. The terms reflect the lender’s strategy to mitigate the higher risk associated with lower credit scores.
Beyond traditional lending, a 628 score can impact other financial aspects. Landlords reviewing rental applications may view a 628 score with caution, potentially requiring a larger security deposit or a co-signer to mitigate their risk. Some insurance providers utilize credit-based insurance scores, which correlate with the likelihood of filing claims. A lower credit score can result in higher premiums for auto, home, and even business insurance, as it suggests a higher risk profile to insurers. Utility companies may also request larger security deposits for new service connections when an applicant has a lower credit score, reflecting a perceived higher risk of late or missed payments.
Key Components of a Credit Score
Credit scores are derived from information within an individual’s credit report, categorized into components, each weighted differently. The FICO scoring model, widely used by lenders, emphasizes payment history, accounting for approximately 35% of the score. This assesses whether past credit accounts have been paid on time, with timely payments positively impacting the score and late payments having a negative effect. Amounts owed, also known as credit utilization, constitutes about 30% of the FICO score. This measures the percentage of available credit currently being used, with lower utilization ratios being more favorable.
Length of credit history contributes approximately 15% to a FICO score, reflecting how long accounts have been established and their average age. A longer history of responsible credit management is seen as positive. New credit, representing about 10% of the score, considers recent credit applications and newly opened accounts. While opening new credit can be necessary, too many recent inquiries or accounts can temporarily impact the score. Finally, credit mix, also accounting for about 10%, evaluates the diversity of credit accounts, such as installment loans and revolving credit.
VantageScore models, developed by the three major credit bureaus, consider similar factors but with different weightings. Payment history is the most influential factor, often making up around 40-41% of the VantageScore. Credit utilization also holds significant weight, around 20%, reflecting the amount of credit used relative to what is available. Depth of credit, encompassing the age and mix of credit accounts, accounts for approximately 20-21%. Recent credit applications and total balances owed also contribute to the VantageScore calculation.
Monitoring Your Credit
Regularly monitoring credit information is a proactive step in financial management. Individuals are entitled to a free copy of their credit report annually from each of the three major credit bureaus: Equifax, Experian, and TransUnion. These reports can be accessed through the official website, AnnualCreditReport.com. Utilize this resource to review the accuracy of information reported by lenders and other entities.
Beyond annual credit reports, many financial institutions, including credit card companies and banks, offer free access to credit scores as a customer benefit. Numerous reputable online services also provide free credit scores. Regularly checking both credit reports and scores is important for identifying discrepancies, errors, or potentially fraudulent activity that could negatively impact credit standing. Addressing inaccuracies promptly helps maintain a true representation of credit history.