How To Go From Fair to Good Credit: Tips & Tricks From Experts

A fair credit score falls between 580 and 669, and a good credit score between 670 and 739. The higher your credit score, the more likely you can get a lower interest rate, higher borrowing limits, and more favorable loan terms. And though you can apply and be approved for a personal loan with fair credit, many borrowers want to understand how to go from fair to good credit to take advantage of all a good credit score offers.

Highlights & Key Takeaways

• A fair credit score falls between 580 and 669, and a good credit score between 670 and 739.
• Taking steps to improve from fair to good credit will give you lower interest rates and more spending power.
• The best way to improve your credit score is to pay your bill on time.
• If your utilization is over 30%, make a plan to pay down your balances and watch your score improve.

How to Improve Your Credit Score from Fair to Good

If you want to improve your credit score from fair to good, there are some tried-and-true strategies. However, it is important to know that developing a good credit score doesn’t happen overnight. It takes time, patience, and responsibility.

Get a credit-builder loan

Credit builder loans are designed to do just that - help you build your credit. With this type of loan, you make fixed payments to your lender and get access to the loan amount at the end of the loan's term. So think of it as a way to demonstrate your financial diligence rather than get funds to use for a purchase.

Apply for a secured credit card

Secured credit cards are different from traditional credit cards in that they require you to make a cash deposit to the credit card issuer to open your account. Using a secured credit card allows you to make purchases with the money you put into the account and lets you build a positive repayment history by making your payments on time every month. And using a traditional or secured credit card responsibly are both equally effective ways to help you move your credit score from fair to good.

Get a co-signer on a loan

If you want to take advantage of better loan terms, you may wish to ask a family member with good or excellent credit to co-sign on a personal loan for you. This allows you to learn financial responsibility and benefit from their good score. However, before doing this, ensure you can commit to your end of the deal.

Become an authorized user on a family member or friend’s credit card account

Similar to getting a co-signer on your personal loan, consider asking a trusted family member or friend to add you to their credit card as an authorized user. This allows you to benefit from their good credit score while you assist with payments and build a stronger credit history.

Check your credit report for errors

The Fair Credit Reporting Act made it so that borrowers can access their credit report for free at least once per year. You can access your credit report directly from the bureaus or at annualcreditreport.com. A big way to protect your credit score and improve it is to ensure that all information on your report is true and accurate. If it is inaccurate, dispute it with the applicable credit bureau, Experian, Equifax, or TransUnion.

Pay off your outstanding debts

One of the most impactful ways to improve your credit score from fair to good is to pay off your outstanding debts. Your score might be sitting in the fair range because your utilization is too high. As a rule, avoid spending over 30% of your available credit limit. Creditors don’t like to see maxed-out credit cards.

Be mindful when applying for new credit applications

Though new credit accounts for 10% of your credit score, applying for new credit too often can hurt your credit score. Every time you apply for credit, a hard credit inquiry can lower your credit score by up to five points. Be cautious too of your credit mix. Applying for too many credit cards or personal loans can create a negative view of your creditworthiness.

Pay your bills on time, all the time

Your payment history represents 35% of your credit score and is the most significant factor. Failure to make a payment can cause a hit to your credit of up to 180 points. So, whatever you do, make sure you can make those payments. A great way to protect yourself is to see if the creditor or lender offers an automated payment program. If they do, sign up.

Seek professional advice if needed

If you feel like you are getting in order your head, you might want to consider a credit counselor. Credit counseling is an effective strategy to help you learn better budgeting techniques and negotiate better terms with creditors. More specifically, credit counseling can help you do the following:

• Manage your money and debts
• Develop a budget
• Obtain your credit report, and scores
• Access no-cost educational materials and workshops
• Participate in a debt management plan to pay down and take better control of your debts

Why is it Important to Establish Good Credit

If you want to improve your score from fair to good, you likely already understand the importance of establishing good credit. Good credit can help you with:

• Accessing loans, credit cards, and rental properties with more favorable borrowing terms
• Getting lower interest rates, insurance premiums, and utility programs
• Increasing your chances for credit approval for new credit cards, auto loans, or personal loans
• Building a stronger financial foundation and credit history
• Improving your financial independence and flexibility
• Improving your chances of getting approved for mortgages and large loans

And the younger you are, the more important these steps might be. At a young age, good credit lays the foundation for future financial stability

How Long Does it Take to Go From Fair to Good Credit

Good credit doesn’t happen overnight. It takes diligence and perseverance. Building credit from scratch takes about six months, but building good credit takes longer. That said, it takes around three to six months of making good credit decisions to see a noticeable difference in your credit score. To improve your credit score from fair to good, be sure to do the following things:

• Continue to pay your bills on time every month. Failure to pay can hurt your score by as much as 180 points.
• Pay extra each month if you can, to help drive down your balances
• Keep your credit balances under 30% of your credit limit. This accounts for 30% of your credit score.
• Be consistent with your credit management.
• Consider applying for new credit if you do not have a healthy credit mix and if it has been some time since you applied for a new loan or credit card. A personal loan for fair credit might be a good addition to your credit mix if you do not have one.

How Much Can You Borrow With a Good Credit Score

The higher your credit score, the more likely you are to have access to lower interest rates and higher credit amounts. For example, check out this chart below that shows the typical APR by credit score.

And just as you can get better interest rates, you can borrow more too because a good credit score demonstrates better creditworthiness. For example, a personal loan for good credit could be as much as $100,000 or more, depending on the intended use of the loan.

Higher borrowing amounts and credit limits have pros and cons that you should also be aware of.

Ways to Leverage Good Credit to Generate Wealth

Taking the steps to go from fair credit to good credit can have other advantages too, besides saving you money. It can also help you make money. 

• Good credit can help you qualify for credit cards with significant bonuses. 
• A good credit score can help you qualify for a mortgage with a favorable interest rate. 
• You can use your good credit score to qualify for a mortgage on an investment property
• If you want to start a business, you can leverage your strong credit score to get a credit card or small business loan that can help you kick off the process and get your idea off the ground. 
• You can take out a personal loan with more favorable rates, including savings on interest and lower monthly payments
• A good credit score gives you the ability to shop around for the best loan and credit card terms.

Final Word

Improving your credit score from fair to good, or even by ten points here or there, can provide you with more and more financial benefits. Remember that a fair credit score falls between 580 and 669, and a good credit score between 670 and 739. The higher your credit score, the more likely you can get a lower interest rate, higher borrowing limits, and more favorable loan terms. To improve your credit score, focus on making your payments on time, keeping your utilization low, and being mindful when opening new credit.