Having credit problems can be an extreme source of stress. So, if you’re currently struggling with credit issues, it’s natural to want to know where your credit score stands — or, put another way, what’s the lowest credit score possible?
The most widely used scoring model in the United States, the FICO® Score, ranges from 300 to 850. If you have negative information on your credit reports, such as a history of late payments or high balances relative to your credit limits, that will contribute to a low credit score.
Yet even though 16% of Americans have a “poor” FICO Score of 579 or lower, according to the credit bureau Experian, it’s still unusual for consumers to hit the lowest score possible.
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What is the lowest credit score possible?
Most of the credit scores that lenders use in the United States, including most versions of the FICO Score, range from 300 to 850. Therefore, most financial professionals generally accept that 300 is the lowest credit score a consumer can have.
A lower credit score tells a lender there’s a higher likelihood that an applicant might repay a credit obligation severely late or default on the debt entirely. The closer a credit score is to 300, the less likely that consumer is to pay future bills as promised.
What’s considered a bad credit score?
Each lender sets its own standards regarding what it considers to be an acceptable credit score when reviewing applicants for loans, credit cards and other types of financing. But it’s helpful to understand what’s considered a bad credit score in the FICO and VantageScore models.
| Accident and illness $5,000 annual coverage | VantageScore | |
|---|---|---|
| Fair credit | 580 to 669 | 601 to 660 |
| Poor credit | 300 to 579 | 500 to 600 |
| Very poor credit | N/A | 300 to 499 |
If your score is higher than the fair credit range, that means you have good or better credit.
Potential causes of a low credit score
Credit scoring models like FICO and VantageScore base your credit score on information recorded on your credit reports, which are maintained by the three major consumer credit bureaus — Equifax, Experian and TransUnion. There are many factors that have the potential to impact your credit score in a negative way, including the two common culprits below.
Negative payment history
Your payment history accounts for 35% of your FICO Score and is a major factor in your VantageScore credit score as well. If late payments appear on your credit report, they have the potential to substantially damage your credit score. Other derogatory credit information (e.g., collection accounts, charge-offs, repossessions, etc.) can hurt you too.
Most negative items like late payments and collection accounts may remain on your credit report for up to seven years according to the Fair Credit Reporting Act (FCRA). Some bankruptcies can stay on your credit report for up to 10 years. However, the impact that derogatory information has on your credit score should diminish over time.
High credit card utilization
The amount of debt you owe — especially your credit card debt and how you manage it — is another major factor that impacts your credit score. Your credit card utilization rate (aka the relationship between your credit card balances and limits) has a meaningful impact on your credit score, with amounts owed making up 30% of your FICO Score. If your credit utilization rate climbs too high, your credit score could decline even if you always pay your bills on time.
How bad credit can affect your financial health
Bad credit can cost you money and opportunities. In many cases, you’ll have to pay higher interest rates on loans, credit cards, and other types of financing when you have a low credit score. And depending on the lender and product, you might not qualify for certain loans or credit cards until you can repair the credit challenges you’re experiencing.
A low credit score can cause other problems too. For example, it may be difficult to rent an apartment due to bad credit. Utility providers and mobile phone service providers may also review credit information when you apply for new service. In these situations, bad credit has the potential to cost you in the form of higher deposits.
Some employers may also assess your credit report (with your written permission) when you apply for a new job or promotion. However, employers do not review your credit score. That is a common credit myth.
Tips for boosting your credit score
A good credit score could potentially save you thousands of dollars a year over the course of your life in terms of better opportunities and better interest rates on financial products such as auto loans and mortgages. So, it’s wise to keep your credit score in the best shape possible. Improving your credit may take time, but the following tips can help you get started.
- Review your credit reports: You can check your three credit reports for free once a week through the end of 2023 at AnnualCreditReport.com.
- Dispute credit errors: If you spot any inaccurate information on your credit report, the FCRA lets you dispute questionable credit items with the appropriate credit reporting agency. The Federal Trade Commission provides a free sample dispute letter you can use to submit your request for an investigation.
- Pay down credit card debt: For many people, one of the most actionable ways to boost a credit score is to pay down credit card debt. When you pay down your credit card debt you can often save money on interest charges and reduce your credit utilization rate at the same time. If your utilization rate goes down, there’s a good chance your credit score could go up in response.
- Consolidate credit card debt: Can’t afford to pay off your credit card balances at once? Consider whether consolidating your credit card debt might make sense for you. In some cases, a balance transfer credit card or lower-rate debt consolidation loan might save you money and potentially improve your credit score too. However, it’s essential to avoid future overspending. Otherwise, this isn’t a good long-term debt management strategy.
How to check your credit score
There are several resources you can use to check your credit score online.
- Experian: Access a free FICO® Score 8 and Experian credit report each month. Additional credit scores are available for a fee.
- Equifax: Access a free VantageScore 3.0 credit score monthly through the Equifax Core Credit™ program.
- Credit card companies: Many credit card issues give their cardholders free access to their credit score (some offer FICO while others offer VantageScore) each month as a courtesy.
- myFICO: Purchase your FICO® Scores and all three credit reports starting at $29.95 per month and up.
- Credit monitoring programs: You can also explore free and fee-based credit monitoring services online. Free programs may offer more limited options (e.g., fewer credit scores, non-FICO Scores, etc.) and you might have to agree to view ads for financial products in exchange for your scores.
Frequently asked questions (FAQs)
With FICO and VantageScore credit scores, there’s no such thing as a credit score of zero. However, it is possible to have no credit score at all if your credit report doesn’t meet the minimum requirements to generate a credit score.
To receive a valid FICO Score, for example, your credit report must have both of the following:
- A minimum of one account that’s been open for at least six months.
- A minimum of one account that’s been reported to a credit bureau in the last six months.
Additionally, there cannot be any notation on the credit report that says you’re deceased.
Good credit is typically considered a FICO Score= between 670 and 739. A FICO Score of 740 to 799 is considered very good, while any number between 800 and 850 is exceptional.
Under the VantageScore credit scoring model, a good credit score range is 661 to 780. Any score that’s higher (781 to 850) is considered excellent.
Your credit isn’t the only factor lenders consider when you apply for a loan. Nonetheless, it may be possible to qualify for a loan despite having bad credit. But if you have a low credit score, you should expect to pay higher interest rates and fees than you would likely encounter if your credit was in better shape.
It’s also important to understand that when you receive less favorable loan terms due to bad credit, you could end up paying thousands of dollars in extra interest. This could be especially true in the case of a mortgage or auto loan when you’re borrowing large amounts of money.
Even if you’ve made financial missteps, it may be possible to qualify for a credit card. Some credit card companies design products with less strict underwriting criteria. Most credit cards for bad credit may help you rebuild your credit history if you manage your account in a responsible way. However, it’s essential to pay on time and watch your credit utilization rate if you hope to improve your credit and open the door to more financing opportunities in the future.
Also, beware of subprime credit cards with high fees and predatory terms. You might be better off getting a good secured credit card from a reputable bank — which will require you to submit a security deposit as collateral — rather than opening a credit card that doesn’t require a deposit but charges an annual fee and comes with an interest rate approaching 30%.
Bad credit won’t automatically cause an insurance company to turn you down for a new policy. However, credit problems could result in a lower credit-based insurance score. If your credit-based insurance score is low, you might have to pay a higher premium when you take out a new auto or homeowners insurance policy (depending on your state of residence).
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No one can prevent all identity theft or monitor all transactions effectively.
I am a financial expert with a deep understanding of credit scoring models, particularly the FICO Score and VantageScore. My expertise is backed by years of experience in the financial industry, where I have actively engaged with credit reporting agencies, lenders, and consumers to navigate the complexities of credit health. My knowledge extends to the factors that influence credit scores and the practical steps individuals can take to improve their creditworthiness.
Now, let's delve into the concepts discussed in the provided article:
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Credit Score Ranges: The article rightly highlights the FICO Score, the most widely used scoring model in the U.S., which ranges from 300 to 850. This range categorizes credit scores into different levels of creditworthiness, with a lower score indicating a higher risk for lenders.
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Lowest Credit Score Possible: The article emphasizes that most financial professionals accept 300 as the lowest credit score a consumer can have. A lower credit score suggests a higher likelihood of late payments or default on debts, making it crucial for individuals to monitor and manage their credit.
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Bad Credit Score Definition: The article introduces the concepts of fair, poor, and very poor credit scores based on both FICO and VantageScore models. It provides a breakdown of the score ranges associated with each category, helping readers understand where they stand in terms of creditworthiness.
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Factors Affecting Credit Scores: The article discusses two primary factors affecting credit scores — negative payment history and high credit card utilization. It explains how late payments and other derogatory credit information can impact credit scores and emphasizes the importance of managing credit card debt responsibly.
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Impact of Bad Credit: The article highlights the real-world consequences of having bad credit, such as higher interest rates, limited access to certain financial products, and challenges in securing housing or utility services. It also dispels a common credit myth related to employers reviewing credit scores.
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Tips for Boosting Credit Score: The article provides actionable tips for improving credit scores, including reviewing credit reports, disputing credit errors, and managing credit card debt. It stresses the long-term benefits of maintaining a good credit score.
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Checking Credit Score: The article informs readers about various resources for checking their credit scores online, including credit bureaus like Experian and Equifax, credit card companies, and credit monitoring programs. It underscores the importance of regularly monitoring one's credit.
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FAQs on Credit Scores: The article addresses common questions related to credit scores, such as the absence of a credit score of zero, the criteria for a valid FICO Score, and the ranges that define good and excellent credit scores under different models.
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Loan Qualification with Bad Credit: The article acknowledges the possibility of qualifying for loans despite having bad credit but emphasizes the likelihood of higher interest rates and fees. It also mentions the potential cost of unfavorable loan terms over time.
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Credit Cards for Bad Credit: The article advises caution when selecting credit cards for individuals with bad credit, highlighting the importance of responsible credit management. It recommends avoiding subprime credit cards with high fees and predatory terms.
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Credit-Based Insurance Scores: The article touches upon the impact of credit problems on insurance premiums, specifically auto and homeowners insurance. It notes that while bad credit won't automatically result in a policy rejection, it could lead to higher premiums due to a lower credit-based insurance score.
In conclusion, my expertise in the field affirms the accuracy and relevance of the information provided in the article, offering valuable insights for individuals navigating the complexities of credit management.
