A bad credit score indicates that a person is a high credit risk based on the credit score generated from the information in their credit report.

When we talk about credit scores, we are referring to a number used to determine your creditworthiness.

Your credit score is generated by a formula based on the information contained in your credit reports.

The most commonly used credit score used in the lending industry today is the FICO Score which typically has a range of 300 to 850.

 

Consumers with FICO Credit Scores of

– 800 or higher are considered to have exceptional credit.
– 740 to 799 are considered to have very good credit.
– 670 to 739 are considered to have good credit.
– 580 to 669 are considered to have fair credit.
– 570 or below are considered to have Poor or Bad Credit.

 

To put things in further perspective, according to a 2019 study done by Experian, the average FICO credit score in the US is 703.

For most lenders, a bad credit score means that the consumer is at a very high risk of defaulting on a loan.

This is why lenders will protect themselves by giving consumers with bad credit scores loans with high-interest rates, high upfront fees, or denying the loan altogether.

A person with a poor credit score will find that their access to credit will be minimal at best.

1. Pay your bills on time
2. Keep your credit card utilization at 30% or less
3. Do not close old accounts
4. Limit inquiries to one every 6 months
5. Carry a good mix of credit

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