Is a 640 Credit Score Good or Bad?

A credit score is a numerical representation of an individual’s creditworthiness, typically ranging from 300 to 850. This three-digit number helps lenders assess the likelihood of a borrower repaying debts on time. Creditors and other entities, such as landlords and insurance providers, use credit scores as a key factor in deciding whether to approve applications and determine the terms of financial products offered.

Understanding Credit Score Ranges

A credit score summarizes information from your credit reports, predicting your reliability in repaying borrowed funds. While several scoring models exist, FICO and VantageScore are the most widely recognized, both typically ranging from 300 to 850. These models categorize scores into general ranges to indicate credit quality:

FICO: Poor (300-579), Fair (580-669), Good (670-739), Very Good (740-799), Exceptional (800-850).
VantageScore: Poor (300-600), Fair (601-660), Good (661-780), Excellent (781-850).

A 640 credit score consistently falls within the “Fair” category for both the FICO and VantageScore models.

What a 640 Score Means for You

A 640 credit score positions you in the “Fair” credit tier. Lenders often view individuals with scores in this range as posing a higher risk compared to those with “Good” or “Excellent” credit. This perception of increased risk typically translates into less favorable terms when seeking financial products.

For mortgages, a 640 score generally allows access to certain government-backed loans like FHA, VA, and USDA loans, which have more flexible credit requirements. Conventional loans may also be accessible, though often with minimum credit score requirements around 620 to 640. However, borrowers with a 640 score can expect higher interest rates and may face requirements for larger down payments or private mortgage insurance (PMI) compared to those with higher scores.

When it comes to auto loans, a 640 credit score usually allows for approval, but typically at significantly higher interest rates. Borrowers in the “Fair” credit range might encounter higher annual percentage rates (APRs) compared to those with stronger credit. Similarly, obtaining credit cards with a 640 score is possible, but you may not qualify for cards offering the most attractive interest rates, rewards, or benefits. Secured credit cards, which require a cash deposit, can be a viable option for building credit in this range.

Regarding rental applications, a 640 credit score is often seen by landlords as a potential risk. While many landlords prefer scores above 650 or 670, they frequently consider other factors beyond just the score. To improve approval chances, applicants with a 640 score may need to provide additional proof of income, strong references, or offer a larger security deposit. Landlords will closely scrutinize credit history for patterns of late payments or defaults, making a clean payment record beneficial even with a moderate score.

Steps to Improve Your Credit Score

Making all payments on time is the most impactful step, as payment history accounts for 35% of your FICO score calculation. Even a single payment reported 30 days late can significantly reduce your score, with the negative impact diminishing over time as consistent on-time payments are made. Setting up automatic payments can help ensure timely remittances.

Managing your credit utilization is another crucial factor. This represents the amount of revolving credit you are currently using compared to your total available credit limit, making up 30% of your FICO score. It is generally recommended to keep your credit utilization ratio below 30%, and ideally even lower, such as below 10%, to positively influence your score. Paying down high credit card balances and avoiding maxing out credit lines are effective ways to lower this ratio.

Individuals should carefully review their credit reports from Equifax, Experian, and TransUnion for any inaccuracies. Disputing and correcting errors can lead to score improvements. While opening new credit accounts can temporarily lower your score due to hard inquiries, strategically adding a mix of credit types, such as installment loans and revolving credit, can be beneficial over time. Maintaining older credit accounts in good standing also contributes positively, as the length of your credit history is a factor in scoring models.