Is a 650 Credit Score Considered Good?
Understand what a 650 credit score means for your financial access and learn practical steps to improve your credit standing.
A credit score numerically represents an individual’s creditworthiness, indicating the likelihood of repaying borrowed money. Lenders use these scores to assess risk when evaluating applications for financial products like credit cards, auto loans, and mortgages. A strong credit score can lead to more favorable terms, including lower interest rates and increased access to credit. Credit scores also influence rental applications, insurance premiums, and certain employment opportunities.
Understanding Credit Scores
Credit scores range from 300 to 850, with higher scores indicating lower risk to lenders. FICO and VantageScore are the two most widely used scoring models, both operating on this 300-850 scale. While categorization varies slightly, general ranges include “poor,” “fair,” “good,” “very good,” and “excellent”. For instance, a FICO score between 580 and 669 is usually considered fair, while 670 to 739 is good.
Credit scores are determined by several key factors, with payment history being the most significant contributor, often accounting for about 35% of a FICO score. This reflects on-time bill payments. The amount owed, or credit utilization, is another substantial factor, representing the proportion of available credit used. A lower utilization ratio, ideally below 30%, is generally seen as positive.
The length of credit history, which includes the age of your oldest and newest accounts, also plays a role, as a longer history provides more data for lenders to evaluate. New credit, including recent applications and newly opened accounts, can temporarily impact a score. A diverse credit mix, showing responsible management of different types of credit like installment loans and revolving credit, can positively influence the score.
What a 650 Credit Score Means
A 650 credit score generally falls into the “fair” range for FICO and VantageScore models. While not “bad,” it indicates past challenges with credit management, such as missed payments or high debt. This score suggests financial responsibility but may still present limitations compared to higher scores.
With a 650 score, various financial products are accessible, including credit cards, personal loans, and auto loans. However, terms offered may not be favorable. For example, loan interest rates could be higher, and credit card limits lower, sometimes requiring security deposits. Securing larger loans, such as mortgages, might be possible but often comes with less competitive rates.
A 650 score can also influence insurance premiums or the need for security deposits on utility services. While allowing credit access, it signals an elevated risk to lenders, leading to less advantageous conditions. Compared to higher scores, a 650 score may make it challenging to obtain premium credit cards with extensive benefits or large unsecured loans without a co-signer.
Steps to Improve Your Credit Score
Improving a credit score requires consistent effort focused on financial behaviors. Making all payments on time is the most impactful action, as payment history accounts for a significant portion of a credit score. Setting up automatic payments can help ensure bills are not missed.
Reducing the amount of owed credit, specifically credit utilization, is another effective strategy. Keeping credit card balances below 30% of the available credit limit is recommended, and paying down balances multiple times within a billing cycle can help maintain low utilization. Avoiding unnecessary new credit applications is prudent, as each hard inquiry can temporarily lower a score.
Regularly reviewing credit reports from the three major bureaus (Equifax, Experian, and TransUnion) for errors is important. Inaccurate information should be disputed with both the credit bureau and the entity that reported it. Keeping older credit accounts open, even if not actively used, can benefit the length of credit history. Becoming an authorized user on a well-managed credit account can also potentially help, provided the primary account holder maintains responsible payment habits and low utilization.