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Is a Fair Credit Score (580 to 669) Good or Bad?

You’ve just been notified that your FICO® score falls between 580 and 669. Now you’re wondering what that means. Can you get a loan? Will you be turned down? Is your credit score the reason for either? Is the fair credit score number good or bad? 

The answer is complicated. Nowhere is the line between “good” and “bad” more blurry than a fair credit score.  And if your credit score falls in the 580 to 669 range, congratulations! You’re in the blur. A score as low as 500 could get you an FHA mortgage, but a score of 620 or above opens the door to conventional mortgages. Furthermore, that same 620 score for an auto loan is considered “non-prime.” 

So it’s only natural to seek some clarity to that blur, learn just what it means to have a credit score in the “Fair” range, and discover how lenders interpret that score.

FICO Score Range Label Percentage of Americans in that range
800-850 Exceptional 21%
740-799 Very Good 25%
670-739 Good 21%
580-669 Fair 17%
300-579 Very Poor 16%

[1] Experian: 620 Credit Score: Is it Good or Bad? https://www.experian.com/blogs/ask-experian/credit-education/score-basics/620-credit-score/

Contents

Fair Credit Scores

580 to 599 Credit Scores

While 580 to 599 might seem like a pretty large range, it’s considered the bottom end of the Fair range of FICO scores, and it’s not a position you want to be in. Yet while a score this low is undesirable, it is not unrecoverable.

With a score at 580, you will likely have trouble qualifying for a lot of financial products. Scores at the low end of the Fair range could lead to approvals, but you’ll likely pay high interest rates. Low credit scores affect more than loans. You may be forced to pay more for car insurance, for example, even with a solid driving record. (See our article about credit-based insurance scores.)

With a score that hovers around 599, you’re certainly in a better position than if your score was 580, but lenders will still have concerns. About 39 percent of Americans with a score of 599 have late payments that are at least 30 days past due. [2] Value Penguin: “Average Loan Interest Rates: Car, Home, Student, Small Business, and Personal Loans” https://www.valuepenguin.com/loans/average-loan-interest-rates Another unfortunate association of those with a credit score of 599 is high amounts of credit card debt. Consumers with a FICO score of 599 have an average total credit card debt of $5,908. [2] Value Penguin: “Average Loan Interest Rates: Car, Home, Student, Small Business, and Personal Loans” https://www.valuepenguin.com/loans/average-loan-interest-rates

It’s true that 30 percent of car loans went to borrowers with credit scores below 600. [7] Nerdwallet: What Credit Score Do You Need to Buy a Car? https://www.nerdwallet.com/article/finance/credit-score-needed-to-buy-car However, those loans are considered subprime and carry inflexible terms with very high interest rates.

600 to 619 Credit Scores

While a credit score in the low 600s is definitely an improvement, it doesn’t put you in a much better position than you were in with a FICO score in the 580 to 599 range, simply because of the number of people with a credit score higher than yours. 83% of Americans have a FICO score higher than 600. [4] Experian: 600 Credit Score: Is it Good or Bad? https://www.experian.com/blogs/ask-experian/credit-education/score-basics/600-credit-score/

Even within the range of 600 to 619, you are still locked out of many options that people with scores in the Good range (just 81 points higher) enjoy, such as qualifying for credit cards with airline and hotel rewards and zero percent interest rate auto loans. Even renting an apartment could be difficult with a score in this range.

620 to 639 Credit Scores

In the 620-639 FICO score range, you are at the middle of the pack, but at least one major door has opened: Most lenders require a credit score between 620 and 640 to qualify for a mortgage. [6] My Mortgage Insider: Low Credit Score Home Buyers In 2021 Could Qualify Because of this new FHA Policy https://mymortgageinsider.com/new-fha-policy-for-low-credit-home-buyers-7494/ That’s a big step; the only mortgages available to borrowers with a score below 620 are FHA loans. (See our article about the difference between FHA and conventional mortgages.)

While there is no set-in-stone qualifying score for an auto loan, the higher your score climbs, the better your loan terms will be.

640 to 659 Credit Scores

For consumers with a FICO credit score in the 640 to 659 range, additional doors begin to open. 

As noted above, the mortgage door begins to open at 620. At 640, mortgage options such as Fannie Mae and Freddie Mac become available as well, as long as you have the necessary 25% down payment to qualify. [8] Fannie Mae: B3-5.1-01, General Requirements for Credit Scores (08/05/2020) https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting-Borrowers/Chapter-B3-5-Credit-Assessment/Section-B3-5-1-Credit-Scores/1032996841/B3-5-1-01-General-Requirements-for-Credit-Scores-08-05-2020.htm#Minimum.20Credit.20Score.20Requirements

In this score range, car loans are accessible, but the interest rates are still considerably high. For example, the national average APR (annual percentage rate) for a car loan with a 659 credit score is 10.546%. With a 660 credit score, that drops to 7.606%. [9] Better Credit Blog: What Credit Score is Needed to Buy a Car? https://bettercreditblog.org/credit-score-for-car-loan/

660 to 669 Credit Scores

A credit score of 660 is a major turning point when it comes to auto loans. At 660, auto lenders tend to offer more favorable terms. At this level, you can find interest rates of seven percent or less. 

While credit scores are divided into categories by credit rating agencies, auto loans are also categorized by the lenders who underwrite them.

In the eyes of auto lenders, once you reach a credit score of 660, your credit is considered “Prime.” That’s the gateway to much more favorable loan terms and lower interest rates.

For a personal loan, the terms are more strict—you’re not out of the “Fair” category until your credit score reaches 690. At this level, You are within reach of what credit agencies and lenders consider a good credit score. Your goal should be to develop habits that raise your score as much as possible.

Living With a Fair Credit Score

Some individuals don’t learn about the impact of their FICO score until the first time they apply for a loan. Don’t put yourself in that position. 

Regardless of what your credit score is, it’s far better to learn not only what your score is, but also how it impacts your life. Your FICO score affects more than bank loans, and while this may seem daunting, you have more control over it than you think.

Credit Score Rating % of People Interest Rate(Personal Loan) Impact
Credit Score 300-579 Rating Very Poor % of People 16% Interest Rate(Personal Loan) 30.25% Impact Applicants may be forced to pay a deposit or fee, or may not be approved for credit at all.
Credit Score 580-669 Rating Fair % of People 17% Interest Rate(Personal Loan) 18.85% Impact People in this number range are generally classified as subprime borrowers. That denotes a less-than-desirable credit standing.
Credit Score 670-739 Rating Good % of People 21% Interest Rate(Personal Loan) 14.5% Impact The percentage of borrowers likely to become seriously delinquent in the future is only 8 percent in this range.
Credit Score 740-799 Rating Very Good % of People 25% Interest Rate(Personal Loan) 11.4% Impact Applicants here tend to get better  than average interest rates from lenders.
Credit Score 800-850 Rating Exceptional % of People 21% Interest Rate(Personal Loan) 11.4% Impact People in this number range gain eligibility to the most favorable interest rates.

Source: Experian [11] Experian: What Is a Fair Credit Score? https://www.experian.com/blogs/ask-experian/what-is-a-fair-credit-score/ [2] Value Penguin: “Average Loan Interest Rates: Car, Home, Student, Small Business, and Personal Loans” https://www.valuepenguin.com/loans/average-loan-interest-rates

Auto Loans

Category Average New Car Interest Rate (Q1 2020) Average Used Car Interest Rate(Q1 2020)
Deep subprime (579 or below) 14.39% 20.45%
Subprime (580 - 619) 11.92% 17.74%
Non Prime (620 - 659) 7.65% 11.26%
Prime (660 - 719) 4.68% 6.04%
Super prime (720 or above) 3.65% 4.29%

Source: Experian [12] Experian: Auto Loan Rates by Credit Score https://www.experian.com/blogs/ask-experian/auto-loan-rates-by-credit-score/

When shopping for a car, the make-or-break moment usually arrives in the finance office while you negotiate the details of your loan. The dealership will typically ask questions about your financial background if your credit score is below 700. [7] Nerdwallet: What Credit Score Do You Need to Buy a Car? https://www.nerdwallet.com/article/finance/credit-score-needed-to-buy-car

One way to avoid having to lay bare your financial life at a car dealership is to ensure your financing is in place before you get there. While that can be difficult with a score in the “Fair” range, it’s possible. Some credit unions offer prime financing to people with scores as low as 660.

Mortgages

Mortgage rates as of May 3, 2021 - 30 Year Fixed, $250k Principal Amount
FICO score APR Monthly payment
760-850 2.668% $1,010
700-759 2.89% $1,039
680-699 3.067% $1,063
660-679 3.281% $1,092
640-659 3.711% $1,152
620-639 4.257% $1,231

Source: myFICO Loan Savings Calculator [13] myFICO Loan Savings Calculator - Accessed May 4, 2021 https://www.myfico.com/credit-education/calculators/loan-savings-calculator/

Most mortgage lenders consider a FICO score below 620 to be subprime. [14] Self Financial: Average FICO Credit Score in America https://www.self.inc/info/average-credit-score-in-america/#impact Unless you’re willing to pay a considerably higher interest rate, your options are likely to be limited. This is because, statistically speaking, the lower the credit score, the greater the risk to the lender that you won’t repay the loan. Higher interest rates are how lenders attempt to insure themselves against defaults. [10] Investopedia: The Side Effects of Bad Credit https://www.investopedia.com/the-side-effects-of-bad-credit-4769783

Renting

It’s not just getting housing that’s tougher with a credit score that falls below the “Good” range. 

Many apartment management firms and landlords use credit checks to screen potential tenants. While there are no hard and fast published guidelines on minimum scores for potential tenants, assume that higher is better, and anything below the “Good” credit score range will be subject to additional scrutiny.

And more…

Remember that house or apartment you managed to land, despite your credit hiccups? Your property or renter’s insurance provider will also check your credit when you apply for a policy to protect your investment. Customers with less than perfect credit may find themselves paying higher insurance premiums.

Improving a Fair Credit Score

Make on-time payments

Creating and maintaining a positive payment history is the most effective way to improve your credit score. [11] Experian: What Is a Fair Credit Score? https://www.experian.com/blogs/ask-experian/what-is-a-fair-credit-score/ Consistently paying your bills on time will go a long way to improving your credit score. Paying off credit-card balances in full as soon as possible will also raise your score.

Improve your credit utilization rate

Credit usage rate is calculated as a percentage. Ideally, you should use no more than 30% of your available credit at any given time. To accomplish this, you can use three strategies. 

Use a secured credit card

When conventional credit cards are unavailable due to credit history blemishes, turn to secured credit cards

A secured credit card works by putting down a deposit that is the full amount of your spending limit. This can be as little as a few hundred dollars, and acts as the security for the credit you are being extended. Then as you use the card and make on-time payments, those are reported to the credit bureaus and will improve your credit score. (Learn about the Self Visa® secured credit card.)

Dispute credit report errors

It’s important to review your credit report on a regular basis to make sure all the information contained in it is accurate. Humans work at the credit reporting agencies and can make mistakes just like anyone else. Catching errors and getting them corrected in a timely fashion can help you change a credit score from “Fair” to “Good.”

What can you do with a Fair credit score

Can I get a mortgage with fair credit?

The good news is that you could qualify for a mortgage with a credit score of 580. The bad news is that at that score, your options are quite limited. 

When you get a mortgage with a 580 credit score, or even with a higher score in the “Fair” range, your mortgage will likely be backed by Fannie Mae or Freddie Mac, making it a federally insured loan.

If you have a credit score in the “Fair” range, it might be a good idea to apply for that mortgage, given that interest rates right now (early 2021) are as low as they’ve ever been. With a positive payment history on an approved mortgage, you could qualify to refinance later at an even lower rate. 

Can I get a car loan with fair credit?

Automobile loans are considered secured loans because, much like a mortgage, the item being purchased acts as the collateral for the loan—in this case, the car. 

Buying a car can be confusing because auto lenders don’t use the same categories or ranges that the credit rating agencies do. While credit rating agencies consider a score of 580 to 669 to be in the “Fair” category, you are considered to be in the “subprime” category of car loans once your credit score dips below 600. 

This re-categorization of scores and the use of the car as collateral allows auto lenders to offer financing to people who wouldn’t otherwise be able to obtain unsecured loans based on their FICO score. However, it also allows auto lenders to charge higher interest rates based on the subprime ranking.

Borrowers with scores of 600 or lower often turn to credit unions for auto loans. Credit unions generally have slightly lower interest rates than banks, and as a result can have more favorable credit terms. Unlike banks, they are not-for-profit institutions. They are also typically smaller than banks and can evaluate your credit situation on a more personal level.

Will I be accepted for a credit card with fair credit?

If your credit score is 660 or above (the upper end of the “Fair” range), you should be able to qualify for credit cards that do not require an initial deposit, and even some cards that offer perks such as cash back, airline and hotel points, zero percent interest, and no annual fee. 

Credit card issuers use 660 as a dividing line because 70 percent of Americans have a credit score higher than 660. That means if your score is lower, you’re in the 30 percent who don’t.

A borrower with a 660 credit score will find difficulty getting approved for cards that offer multiple perks such as bonuses in the first year, or travel and/or hotel points for purchases. But, there are cards that offer things like 0 percent financing or cash back for purchases. These cards come with lower credit limits that can help borrowers manage their debt and build a positive payment history.

Sources

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