What is a ‘bad’ credit score?

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In a Nutshell

A credit score below 600 is generally considered to be a bad credit score, with scores up to the low 600s still below the average. But since everyone has multiple credit scores, “bad” is a relative term depending on how each particular credit score is calculated.

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Have you recently checked your credit score and found the number lower than you expected? If so, you may be scrambling to find out what exactly the finance industry considers a “bad” credit score.

A credit score of 600 or below is generally considered to be a bad credit score. And if your credit is low, you may qualify for a loan but the terms and rates may not be favorable. Credit scores between 601 and 669 are considered fair credit scores. Continue reading to learn the nuances of how your credit scores are calculated and why your credit score matters.


You have a lot of credit scores and they may not match each other

It’s important to understand that every consumer has many credit scores. So “bad” is really a relative term depending on how the score is calculated and the type of financing that you’re applying for.

For example, the credit score that your credit card issuer provides with your credit card statement may be slightly different from the score you receive from a credit-monitoring tool like Credit Karma.

So why aren’t all your credit scores identical? Here are three common variables that can affect the credit scores you see.

Credit bureaus

Your credit scores are based on the information found inside your credit reports. The three major consumer credit bureaus that collect credit data for reports are Equifax, Experian and TransUnion.

When lenders check your credit score, they typically pull only credit report data from one or more credit bureaus. But your credit report may look slightly different with each bureau. Perhaps one of your previous lenders reported only your payment history to one of the bureaus. Or perhaps your credit report with one of the bureaus has an error.

For these reasons, a credit score based on one credit report could look different from a score based on the other credit reports.

Credit-scoring models

A credit-scoring model is the scoring system that’s used to calculate your score. One well-known scoring model is the FICO® credit-scoring model, developed by the Fair Isaac Corporation. Lenders have been using FICO scores to help them make lending decisions since 1989.

But FICO isn’t the only credit-scoring model. In 2006, the three credit bureaus combined forces to create an alternative scoring model called VantageScore. Each model uses its own proprietary algorithm to calculate its scores. So while your FICO and VantageScore should be similar, they may not be exactly the same.

It’s also important to point out that both of these companies periodically release new versions of their scoring models. So even if two lenders use the same credit-scoring model, they could end up with different credit scores for you if they’re using different versions. Learn more about VantageScore vs. FICO®.

If you’d like to see your FICO scores from each bureau, you can purchase a subscription from MyFICO. Or you can get your VantageScore® 3.0 credit scores from Equifax and TransUnion for free from Credit Karma.

Lending products and industries

As if things weren’t complicated enough, there are special scores for different types of lenders, too. For example, in addition to its most widely used FICO Score 8, FICO has the following industry-specific scores:

  • FICO Auto Score: Used in the auto industry
  • FICO Bankcard Score: Used in the credit card industry
  • FICO Score 2, 4 and 5: Used in the mortgage industry

For its base scores, FICO uses a range of 300 to 850. But it uses a range of 250 to 900 for its industry-specific scores.

While there are various ways to see your base FICO Score for free, you’ll need to pay a subscription fee to access your industry-specific FICO Scores.

What is a bad credit score?

We’ve established that your credit score can look different depending on the credit bureau, scoring model and financial product. But what does a bad credit score look like in each model or product? Let’s take a look at a few examples.

FICO Score

If you have a score below 580, you’re currently in the lowest FICO credit score range — called Very Poor. Below are all five FICO Scores ranges.

Below 580

Poor

580–669

Fair

670–739

Good

739–799

Very Good

800+

Exceptional

Like FICO Scores, the newer versions of VantageScore use a range of 300 to 850. Rather than publishing a strict set of credit score ranges, VantageScore Solutions, the company that manages the VantageScore scoring models, simply says that lenders generally interpret higher scores as less of a risk.

But Experian, a credit bureau that helped create the VantageScore model along with Equifax and TransUnion, says that any score below 601 is considered Poor or Very Poor. Below are all five VantageScore ranges according to Experian.

300–499

Very Poor

500–600

Poor

601–660

Fair

661–780

Good

781–850

Excellent

Mortgages

In general, higher credit scores will result in better interest rate quotes from mortgage lenders. But the minimum credit score that a mortgage lender will accept will depend on the type of loan that you’re applying for. Here are the credit score minimum guidelines for a few common loan types.

Loan type Minimum credit score

FHA

580 (to qualify for 3.5% down payment)

500 (with 10% down payment)

Conventional Loan

620

USDA Loans

No set minimum, but a score of at least 640 is required for streamlined credit analysis.

There is no minimum credit score for securing a car loan. Each auto lender is free to set its own minimum credit score requirements.

But each quarter, Experian’s State of the Automotive Finance Market report shows the percentage of car buyers from each credit-scoring range. Here were the results from the fourth quarter of 2019.

Credit score range Percentage of new car loans

300–500

3.24%

501–600

18.45%

601–660

19.80%

661–780

39.47%

781–850

19.03%

These statistics show that nearly 80% of all auto loans in the fourth quarter of 2019 went to borrowers with a credit score above 600.

Why having good credit is important

Having good credit can help you in many ways. The most obvious is by helping you qualify for better interest rates on loans.

According to May 2020 data from myFICO, increasing your credit score from a range of 620–639 to 760–850 could lower your monthly payment by nearly $200. That’s a big deal!

But even if you aren’t planning to apply for a mortgage or another form of financing, your credit scores can still affect your life. Your credit report information could affect your home and car insurance rates, your eligibility for rental housing, and depending on where you live, it may potentially affect your job applications.

With so many ways that your credit report and scores can influence your life, it’s important to keep close tabs on both and take quick action when you notice credit file mistakes.


Next steps

Are your credit scores lower than you’d like it to be? That’s OK. The good news is that it’s never too late to improve your credit scores! Today can be the day that you start to turn your scores around.

To learn how to build your scores, take a look at our Guide to Building Credit. And for more information (and inspiration), check out the Five Tips to Improve Your Credit Health.