Is a 637 Credit Score Good? What to Know and How to Improve

A credit score is a numerical representation of creditworthiness. This number helps lenders assess timely loan repayment. Credit scores are important because they influence access to various financial products, including credit cards, loans, and mortgages. A higher score leads to more favorable terms and lower interest rates.

Understanding Credit Score Ranges

Two primary credit scoring models, FICO and VantageScore, are widely used, both ranging from 300 to 850. FICO scores categorize credit as Poor (300-579), Fair (580-669), Good (670-739), Very Good (740-799), and Exceptional (800-850). Similarly, VantageScore uses ranges such as Very Poor (300-499), Poor (500-600), Fair (601-660), Good (661-780), and Excellent (781-850). A 637 credit score falls into the “Fair” category for both models.

While a 637 score is above the “Poor” range, it is considered below average. This score indicates a moderate level of risk to lenders, limiting credit options. Individuals with a 637 score find it challenging to secure competitive interest rates or favorable loan terms.

Impact on Financial Products

A 637 credit score has implications for various financial products. When seeking credit cards, individuals with this score qualify for secured credit cards, which require a cash deposit as collateral, or unsecured cards with higher annual percentage rates (APRs) and lower credit limits. Access to premium rewards cards or those with introductory 0% APR offers is restricted.

For personal loans, a 637 score results in higher interest rates, increasing the total cost of borrowing over the loan term. Lenders also impose stricter repayment terms or require collateral, depending on the loan amount and the applicant’s overall financial profile. Auto loans similarly come with higher APRs, translating to a greater overall expense for the vehicle purchase. A larger down payment also becomes necessary to secure financing.

Obtaining a mortgage with a 637 score presents challenges. While FHA (Federal Housing Administration) loans are accessible with lower scores, conventional mortgages require a minimum score of 620, and a 637 score will lead to significantly higher interest rates and potentially mandatory mortgage insurance premiums. A co-signer becomes a prerequisite to improve approval chances and terms.

Factors Influencing Your Score

Credit scores are derived from several components from credit reports, each weighted differently. Payment history carries the most weight, accounting for about 35% of a FICO score, and it reflects whether bills have been paid on time. A consistent record of on-time payments demonstrates financial reliability.

The amount owed, also known as credit utilization, is another factor, making up approximately 30% of a FICO score. This ratio compares the amount of credit used against the total available credit; keeping this ratio low, below 30%, is advisable. The length of credit history, which considers the age of accounts and the average age of all accounts, contributes about 15% to the score. Longer histories of responsible credit use are viewed favorably.

New credit inquiries, representing recent applications for credit, account for about 10% of the score. Numerous inquiries in a short period suggest higher risk to lenders. Finally, the credit mix, which evaluates the types of credit accounts held (e.g., revolving credit like credit cards and installment loans like mortgages), contributes the remaining 10%. A diverse mix indicates an ability to manage different forms of credit effectively.

Strategies for Improvement

Improving a 637 credit score involves consistent actions focused on the factors that comprise the score. Prioritize making all payments on time, every time, as payment history is the most impactful element. Setting up automatic payments or payment reminders help avoid missed due dates.

Reducing credit utilization is another strategy, aiming to keep balances on revolving accounts, such as credit cards, well below 30% of the available credit limit. Paying down existing debt, even small amounts, significantly lowers this ratio and positively affects the score quickly. Avoiding unnecessary new credit applications is also important, as each hard inquiry temporarily lowers the score. Space out applications for new credit to minimize their impact.

Regularly obtaining and reviewing credit reports from each of the three major credit bureaus—Equifax, Experian, and TransUnion—helps identify and dispute any inaccuracies. Consumers are entitled to a free report annually from each bureau. For individuals with limited credit history, considering a secured credit card or a credit-builder loan helps establish a positive payment track record. These products are designed to build credit by reporting consistent, on-time payments to the credit bureaus.