What is a Fair Credit Score & What Can It Get You?

A fair fico score is a score that falls between 580 and 669. It’s better than a ‘poor’ score but not as high as a ‘good’ credit score. Having a fair credit score will limit how many opportunities are available to you. You may be able to get a loan with fair credit, but the rates and terms won’t be as favorable as those offered to borrowers with better credit scores. 

Highlights /Key Takeaways

• Know what is a fair credit score: A fair credit score isn’t bad but it isn’t good. It may be good enough to qualify for some loan products but not all. You may be limited on the amount you can borrow and your rates will be higher than rates offered to borrowers with better scores. 
• How a fair credit score can be negatively impacted: Learn about things like missed payments and late payments and how they may be lowering your credit score. 
• Loans available for borrowers with fair credit scores: Know where to find loans for fair credit scores and compare their rates, terms, and fees. 
• Learn tips to improve your credit score: Take your credit score from fair to good or excellent, learn tips from financial pros about what it takes to quickly improve your credit score and what common mistakes to avoid. 

What Will a Fair Credit Score Get You?

A fair credit score may get you the following:

• Prepaid credit card: Whatever amount you put on the card is the amount you have to spend. The cardholder usually sets a low credit limit and they do charge fees, but it can be a great way to increase your credit score and build credit over time.  
• A non prepaid credit card: This is a typical credit card that has a limit set by the card holder. You will have to pay interest if you don’t pay the balance in full each month. 
• A personal loan: This is a loan issued by a lender that can be used for a variety of reasons. Collateral is usually not required for this type of loan. 

How To Qualify For Loans and Credit Cards With Fair Credit

A fair credit score may get you personal loans and credit cards but it can be limiting. You will need to have other aspects of your overall financial profile in order to make up for your less than stellar credit score. 

The following will be important if you have a fair credit score:

• Your income: This will need to be substantial to compensate for the fair credit score. 
• Low debt-to-income ratio: Under 35% is ideal. This will be scrutinized as well due to your fair credit score.  

Fair Credit Score vs. Good Credit Score

In order from the worst credit score to the best, the credit score ranges are poor, fair, good, great, and excellent. Keep in mind that these five ranges can also be called slightly different names. 

Let’s take a look at a comparison between fair and good credit scores displayed on the table below. 

If you have what is considered to be good credit or higher, you will receive higher loan limits than if you have fair credit. You will also pay less in interest because you’re getting a lower interest rate.

Fair Credit vs. Good Credit Loan Limits

If you have a fair credit score, expect to receive lower loan limits than if you had a good, great, or excellent credit score. Typically, personal loans have maximum loan limits of $100,000 for very well qualified borrowers with excellent credit scores. Loan limits vary based on lender requirements, the type of loan, and the borrower’s income and credit score. If you have fair credit, it’s unlikely that you will be able to borrow more than $20,000. 

However, there are some loans available to borrowers with fair credit scores, but there aren’t as many options available as there are for borrowers with good credit. And borrowers with excellent credit scores have access to the greatest amount of financial products and opportunities as well as the most competitive interest rates, the lowest fees, and the best terms. That’s why it’s so important to take steps to improve your credit score. 

Factors That Can Lower Credit Scores

Your credit score is determined by a number of components including payment history, the number and type of accounts, your credit utilization, and the length of your credit history.

Some factors that can lower your credit score include:

• Missed payments: Set up auto-pay and put all payment dates in your calendar because missed payment can have a terribly negative affect on your credit score. 
• Late payments: Late payments affect your credit score. In fact, most creditors report you as late to the credit bureaus if your payment is more than 30 days late. You will also have to pay late fees. 
• High credit utilization rate: You should aim to keep this as low as possible, ideally under 25%. This is the amount of credit you use vs the amount of credit that is available. 
• Derogatory marks: These include things like accounts that are in collection, bankruptcies, and foreclosures.

You can recover from these negative factors by paying all of your debts on time in the future, keeping an eye on your credit utilization rate, and not borrowing more than you can afford to pay back. You may just need some time for your credit to improve and things like past bankruptcies to fall off. 

Tips For Improving Fair Credit

Financial experts recommend the following tips for improving fair credit:

• Review your credit score: You can’t make changes until you know what you’re working with. Know what’s on your credit report and check to make sure all of the information is accurate and updated. Make sure you’re getting credit for paying things like your utility bills and rent on time. 
• Avoid opening too many accounts: You want to be able to keep track of your accounts and not be too tempted to overspend. 
• Make payments on time: Avoid late fees by paying on time. This will also ensure you have a positive payment history and your credit score isn’t docked for paying late or missing a payment. 
• Keep balances low: Just because you have a $10,000 credit limit, doesn’t mean you should spend it all. Don’t get caught up with credit card debt. Use it responsibly and pay your balances in full each month. This will save you money in interest and improve your credit score as well.  

Fair Credit Score vs. Other Credit Score Ranges

As we mentioned earlier, your credit score is made up of a number of factors including your payment history, number of accounts, type of accounts, length of credit history, and your credit utilization. 

And in addition to all that, there are three different credit bureaus plus VantageScore which is a consumer credit scoring system that was created by the three credit bureaus. Your Fico score is the number TransUnion, Expedia, or Experian gives you which uses a 45 day period. Your VantageScore typically uses a 14 day reporting period. 

Let’s take a look at the different credit score ranges:

TransUnion, Experian, and Equifax Credit Score Ranges Table

VantageScore Credit Score Ranges Table

How to Prioritize Debt Repayment With a Fair Credit Score

When you have a fair credit score, you want to work on ways to increase your credit score but you also need to prioritize paying back your debt. It’s important to come up with a debt repayment plan that maximizes your credit-building potential. You want to pay back high interest debt first and also prioritize debt that will have the most positive impact on your credit score when it’s paid off. 

Focus on paying back the following types of debt first when you have a fair credit score:

• The highest interest debt: Stop accruing interest and wasting money. Prioritize paying back high interest debt. It will save you money in the long run. 
• Anything in collections: Having an account in collections is seen as a derogatory mark on your credit report. Pay back this debt to avoid further collections actions and fees. Once this gets removed from your credit history, it will cause your score to jump up, often as high as 20 or more points. 
• The most expensive debt: This may be the largest debt or the one with the highest interest rate or both. It’s costing you the most money so it should be tackled first. This may take a while to pay back but it will be worth it once it’s paid off and you can dedicate those funds towards something else. 
• The debt that will affect your credit score the most: If you use a free service such as Credit Karma, they will give you an estimate of how much your credit score will go up once you pay off each debt. This will help you determine which debt to pay off first. This can also help if you have a credit score goal in mind or want to make a large purchase where a specific credit score is needed. 

The Role of Credit Monitoring in Improving a Fair Credit Score

Credit monitoring is a service that watches your credit reports for you and alerts you to any changes, red flags, or suspicious activity. The credit monitoring companies may offer you a free trial and then generally charge you a monthly fee in exchange for monitoring your credit. 

Credit monitoring is used for a number of reasons. 

• You may not have time to monitor your credit yourself
• You may want to protect yourself from fraud and identity theft
• You may want to be alerted to any changes on your credit. 

If you’re working on increasing your credit score, you may want to use credit monitoring services so you can see when your credit score increases as soon as it happens. You can also see when accounts have been paid in full, if a new account is opened, or if an account has been placed in collections.  

Using a credit monitoring service can help you keep an eye on your credit score. It can also help you raise your credit score because you simply know what’s going on. You can immediately find out if there are errors on your credit report and dispute them. You can also be alerted to suspicious activity and immediately take action before any damage is done to your credit score. 

Final Word

Now you know that a fair credit score will allow you to qualify for some loans and credit cards but you won’t qualify for the best rates or terms and your loan limits will be lower than borrowers with higher credit scores. 

Keep checking your credit score and work on improving it so you too can take advantage of the best loan products and the most competitive rates.