Is a 629 Credit Score Bad? What It Means & How to Improve

A credit score numerically summarizes an individual’s creditworthiness, providing a snapshot of their financial behavior. Scores from models like FICO and VantageScore are generated from credit reports, indicating to lenders an applicant’s likelihood of repaying borrowed funds. A higher score generally signifies lower risk to lenders, potentially leading to more favorable borrowing terms. Understanding what these scores represent is an important step in managing personal finances effectively. This overview clarifies what a specific score, such as 629, means in the broader financial landscape.

Understanding Credit Score Ranges

Credit scores are presented within a range, with different categories indicating varying levels of credit risk. FICO Score ranges classify scores from 300 to 850, with 580 to 669 considered “Fair” credit. VantageScore 3.0 models also range from 300 to 850, with scores from 601 to 660 falling into the “Fair” category.

A 629 credit score places an individual within the “Fair” credit range for both FICO and VantageScore models. This is below the average U.S. FICO score of 715 in 2023. A 629 score suggests lenders may perceive the borrower as having unfavorable credit or posing a moderate risk. Consequently, some lenders might decline applications from individuals with scores in this range.

Accessing Credit with a 629 Score

Accessing credit products with a 629 score is possible, though it often involves less favorable terms than for those with higher scores. Lenders view a 629 score as subprime, indicating higher risk. This can lead to higher interest rates, increased fees, or stricter eligibility criteria across different loan types.

For instance, a 629 score might meet minimum conventional mortgage requirements, but interest rates will likely be considerably higher than for applicants with excellent credit. An individual with a 620-669 FICO score might face an average interest rate significantly above what someone with exceptional credit would receive. This difference translates to hundreds of dollars more in monthly payments over the loan’s lifetime.

Auto loans also reflect this disparity; a borrower with a 620-659 credit score could expect an average Annual Percentage Rate (APR) of around 11.76% for a 60-month new auto loan, compared to approximately 5.34% for someone with prime credit (720 or higher FICO score). For credit cards, approval is achievable with a 629 score, but options may be limited to cards designed for building or rebuilding credit. These cards come with higher interest rates, often around 20%, and lower credit limits. Personal loans may also be available, but they often carry higher interest rates, sometimes as high as 36%, reflecting the increased risk perceived by lenders.

Components of a Credit Score

Credit scores are derived from multiple factors within an individual’s credit report, with each category contributing a specific weight. The FICO scoring model, widely used by lenders, bases its calculation on five main components.

Payment history holds the largest influence, accounting for 35% of a FICO Score. This category assesses whether past credit accounts have been paid on time and consistently, including any late payments, collections, or bankruptcies. Lenders prioritize on-time payments as they indicate a borrower’s reliability.

The amount owed, also known as credit utilization, is the second most significant factor, making up 30% of the score. This measures the percentage of available credit currently being used, particularly on revolving accounts like credit cards. A high utilization rate often signals higher risk to lenders.

The length of credit history contributes 15% to a FICO Score. This factor considers how long credit accounts have been established, including the age of the oldest account and the average age of all accounts. A longer history of responsible credit management has a positive impact.

New credit accounts and inquiries comprise 10% of the score, reflecting how recently new credit has been sought. Opening several new accounts in a short period can temporarily lower a score as it suggests increased risk. Finally, the credit mix, which considers the diversity of credit types (e.g., credit cards, installment loans), accounts for the remaining 10%. Demonstrating the ability to manage different types of credit responsibly can be beneficial.

Strategies for Credit Score Improvement

Making all payments on time is the most impactful action, as payment history is the largest component of a credit score. Setting up automatic payments can help ensure bills are never missed, establishing a pattern of timely repayments.

Reducing credit card balances and maintaining a low credit utilization ratio is another step. Keep total credit card balances below 30% of the available credit limit across all accounts to positively influence the score. This demonstrates responsible credit usage and can provide a significant boost.

Regularly reviewing credit reports for errors is also important, as inaccuracies can negatively affect a score. Free credit reports can be accessed annually from AnnualCreditReport.com. If errors are found, dispute them directly with the credit bureaus (Experian, TransUnion, Equifax).

Avoid opening too many new credit accounts at once, as each new application results in a “hard inquiry” that can temporarily lower a score. Multiple inquiries in a short period can have a cumulative negative effect.

For individuals with limited credit history or those rebuilding credit, secured credit cards or credit-builder loans can serve as effective tools. Secured credit cards require a deposit that acts as the credit limit, while credit-builder loans involve making payments into a savings account before accessing the funds. Both products report payment activity to credit bureaus, helping to establish a positive payment history. Keeping older credit accounts open, even with a zero balance, can benefit the score by maintaining a longer average length of credit history and higher overall available credit.