Is a 637 Credit Score Bad? What It Means & How to Improve

A credit score is a numerical summary of an individual’s creditworthiness, indicating to lenders how responsibly credit has been managed. This three-digit number influences access to various financial products and services.

Understanding Credit Scores

A credit score reflects a person’s financial behavior and history, used by lenders to evaluate credit risk. Two prominent credit scoring models in the United States are FICO and VantageScore, both typically ranging from 300 to 850 points. A higher score generally indicates a lower risk to lenders, making a borrower more attractive.

Scoring models categorize scores into broad ranges: Poor, Fair, Good, Very Good, and Excellent. FICO scores, for instance, consider 580-669 as Fair. VantageScore models also use the 300-850 range, with similar classifications. Scores can exhibit slight variations across different models and credit bureaus due to differing data interpretations.

Credit scores are not static; they fluctuate based on ongoing financial activity. Regular on-time payments and responsible credit use can lead to improvements over time, while missed payments or high credit utilization can cause scores to decline. Lenders may also consider other factors beyond the score, such as income or debt-to-income ratio, when making lending decisions.

What a 637 Credit Score Means

A 637 credit score falls into the “Fair” category for both FICO and VantageScore models. FICO categorizes scores between 580 and 669 as Fair, indicating a moderate level of risk to lenders.

While a 637 score is not “bad,” it is below the “Good” tier (starting at 670 for FICO). Individuals with a 637 score may qualify for credit products, but often with less favorable terms, such as higher interest rates and less flexible repayment options.

The average FICO score in the U.S. was 715 in 2023, placing 637 below the national average. While approval for credit may be possible, associated costs will likely be higher.

Factors Influencing Your Credit Score

Several key components contribute to the calculation of a credit score, each weighted differently by scoring models. Payment history is the most significant factor, accounting for approximately 35% of a FICO score. Consistent on-time payments positively impact the score, while late payments can significantly lower it and remain on a credit report for up to seven years.

Credit utilization, the amount of credit used relative to the total available credit, is another major factor, typically comprising about 30% of a FICO score. Experts recommend keeping credit utilization below 30% to maintain a strong score. Maxing out credit cards or consistently using a high percentage of available credit negatively affects the score.

The length of credit history accounts for around 15% of a FICO score, reflecting the age of accounts and the average age of all accounts. A longer history of responsible credit management generally results in a higher score. The credit mix, which considers the variety of credit accounts (e.g., installment loans like mortgages or auto loans, and revolving credit like credit cards), contributes approximately 10% to the score. Demonstrating responsible management of different credit types can be beneficial.

New credit applications, which result in “hard inquiries,” make up about 10% of a FICO score. Each hard inquiry can cause a small, temporary dip, typically affecting it for up to 12 months. Multiple applications within a short period can signal higher risk to lenders.

Implications of a 637 Credit Score

A 637 credit score carries various practical implications across different financial services, often leading to less favorable terms. For loan approvals, such as mortgages, auto loans, or personal loans, a 637 score typically means higher interest rates. Mortgage rates for a 637 FICO score could be significantly higher than for those with excellent credit, potentially adding thousands of dollars to the total cost of a loan over its lifetime. While approval might be possible, the financial burden will be greater.

Credit card offers for individuals with a 637 score may also be less attractive. Available cards might have higher annual fees, lower credit limits, and elevated annual percentage rates (APRs). Some premium rewards cards may be out of reach.

For housing, landlords often perform credit checks, and a 637 score could necessitate a larger security deposit or even limit rental options. Utility companies may also require deposits for new service, suggesting a higher risk of late payments.

Insurance premiums can also be influenced by credit scores in many states, as studies indicate a correlation between lower scores and a higher likelihood of filing claims. A 637 score may result in higher auto or home insurance rates. While some states restrict this practice, it remains common.

Improving Your Credit Score

Improving a 637 credit score involves consistent effort and strategic financial habits, focusing on the factors that influence the score. Making all payments on time is the most impactful step, as payment history carries the heaviest weight. Setting up automatic payments or reminders can help ensure bills are paid by their due dates, preventing negative marks.

Reducing credit utilization is another crucial action. Keep the amount of credit used on revolving accounts, like credit cards, well below the total available limit. Experts recommend maintaining a credit utilization ratio under 30% across all accounts. Paying down existing balances and avoiding new debt can effectively lower this ratio.

Avoid opening too many new credit accounts in a short period, as each application results in a hard inquiry that can temporarily lower the score. While hard inquiries have a minimal impact, excessive new credit seeking can signal increased risk. Maintaining a healthy mix of credit types, like installment loans and revolving credit, can also be beneficial.

Regularly review credit reports from all three major bureaus (Experian, Equifax, and TransUnion). This allows individuals to identify and dispute inaccuracies or errors affecting their score. Free copies are available annually from AnnualCreditReport.com. While improving a credit score takes time, consistent application of these practices leads to positive changes.