What a 604 Credit Score Means and How to Improve It

A credit score is a numerical representation of an individual’s creditworthiness, typically a three-digit number ranging from 300 to 850. Lenders use these scores to assess the risk involved in extending credit, such as loans or credit cards. The score provides a snapshot of a person’s credit risk at a particular moment, indicating how likely they are to repay borrowed money on time. A higher score generally signifies lower risk to lenders, which can influence the credit options and terms offered.

Understanding Your 604 Credit Score

A 604 credit score falls into the “Fair” or “Average” category across common scoring models. FICO Scores classify scores between 580 and 669 as Fair, and VantageScore models place scores between 601 and 660 in the Fair range. This indicates some challenges in a borrower’s credit history, though it is not considered “Poor.”

Lenders view a score in this range as showing some risk, but it does not necessarily mean automatic denial for credit. It sits above the “Poor” category (FICO 300-579, VantageScore 300-499 or 500-600). A 604 score is below the “Good” range (VantageScore 661+, FICO 670+). While credit may be accessible, terms are often less favorable than for those with higher scores.

Impact of a 604 Credit Score

A 604 credit score has practical implications across various financial aspects. Loan approvals are possible, but options may be limited compared to individuals with higher scores. Borrowers with a fair credit score often encounter higher interest rates on financial products like auto loans, personal loans, and mortgages. These elevated rates mean the total cost of borrowing will be greater.

Securing prime credit cards can also be difficult. Instead, options like secured credit cards, which require a cash deposit as collateral, or cards with lower credit limits and higher annual percentage rates (APRs) may be more accessible. Beyond traditional lending, a fair credit score can affect renting an apartment. Landlords review credit reports, and while a 604 score may not automatically disqualify an applicant, it might lead to requests for a higher security deposit or a co-signer. Utility companies may also require deposits from individuals with lower credit scores.

Improving Your Credit Score

Improving a 604 credit score involves consistent financial discipline. Making all payments on time is the most important step, as payment history is a primary factor in credit scoring. Setting up automatic payments or reminders can help ensure that credit card bills, loan installments, and other debts are paid by their due dates. Even one missed payment can negatively affect your score.

Managing your credit utilization ratio is also important. This ratio represents the amount of revolving credit used compared to the total available credit. Experts advise keeping this ratio below 30%, as a lower percentage indicates responsible credit management. This can be achieved by paying down existing balances or requesting a credit limit increase without increasing spending.

Maintaining older credit accounts, even if unused, can benefit your score by preserving the length of your credit history. Closing old accounts can shorten this history and potentially increase your credit utilization ratio. Avoid opening too many new credit accounts in a short period, as each application results in a “hard inquiry” that can slightly lower your score. Regularly review your credit reports from Experian, Equifax, and TransUnion to identify and dispute any inaccuracies.

Key Factors Influencing Credit Scores

Credit scores are derived from several factors, each weighted differently by scoring models like FICO and VantageScore.

Payment History

This is the most significant factor, typically accounting for about 35% of a FICO Score and 40-41% for VantageScore. It reflects whether bills are paid on time; late or missed payments can have a negative impact.

Amounts Owed (Credit Utilization)

This factor makes up approximately 30% of a FICO Score and 20% for VantageScore. It assesses how much of your available credit is being used, with lower utilization generally leading to better scores.

Length of Credit History

This includes the age of your oldest account and the average age of all accounts, contributing around 15% to a FICO Score and 20-21% to a VantageScore. A longer history of responsible credit use is seen favorably.

Credit Mix

This refers to the diversity of account types, such as revolving credit (e.g., credit cards) and installment loans (e.g., mortgages, auto loans). It usually accounts for about 10% of both FICO and VantageScore models. While beneficial, it is not advisable to open new accounts solely to diversify.

New Credit

This encompasses recent applications and newly opened accounts, making up about 10% of a FICO Score and 5% for VantageScore. Frequent applications in a short period can indicate higher risk to lenders.