Subsequently, if your FICO rating is below 670, you have a bad credit score. Also, according to the VantageScore model, a credit rating under 661 is considered to be in the bad credit rating category.

Creditors commonly use the term “subprime” to describe debtors with credit ratings in this range, and those with bad credit ratings may find it hard to obtain credit or to do so on favorable provisions. You may be refused a loan if your credit rating is too low. Even if you do find a creditor willing to work with you, expect to pay a higher interest rate.

Opening a new credit card or attaining a mortgage are both made more difficult by having bad credit. Credit limits could be lowered, interest rates could rise, and you could be denied a job because of poor credit.

Because many monetary institutions employ various credit scoring methods or have their own internal criteria, the cutoff for what constitutes a poor credit rating varies. However, using credit rating ranges from the two most often used scoring models (FICO and VantageScore), we can give you a rough indication of how good or bad your credit rating is.

Let’s go deeper into what makes up a bad credit rating and what you can do to improve that rating and open up more monetary doors for yourself.

What Is Considered a Bad Credit Score?

According to the Consumer Financial Protection Bureau (CFPB), a credit rating is “a snapshot” of a person’s credibility. For this reason, the Consumer Financial Protection Bureau warns that your credit rating may be used by future creditors when deciding whether or not to provide you with credit.

If you have negative marks on your credit record, you send a message to potential creditors that you are not a reliable debtor and should be avoided. Bad credit ratings can be the result of a number of issues, such as missed settlements in the past, large outstanding levels of debt, or even a recent bankruptcy.

In order to determine a person’s credibility, several credit scoring agencies employ various methods. Credit ratings and scoring methodologies come in a wide variety. That means there are likely multiple “ratings” for each person. 

According to the CFPB, the typical rating is between 300 and 850. The Consumer Financial Protection Bureau further notes that FICO® and VantageScore® credit ratings are among the most widely used in the market today.

A low credit rating, the numerical summary of the info in your credit record, is a common indicator of poor credit. However, the methods used to calculate ratings and the criteria for what defines bad credit are not universal. 

Keep in mind that prospective creditors make judgments regarding your credit and evaluate what constitutes a low rating. Below, however, are some more specifics regarding how FICO and VantageScore evaluate credit ratings.

Bad Credit FICO Score

The most popular version of the FICO scoring methodology is FICO Score 8, which has a rating range of 300 to 850. This percentage indicates how likely it is that a loan will be repaid in full. Bad credit rating debtors provide a greater risk to the lending institution. A bad credit rating may make you appear to creditors as a high risk.

When you have a bad credit rating, you may have trouble attaining loans like credit cards, mortgages, and auto loans. There may be additional repercussions for a low grade. To receive a credit card or set up home utility services, for instance, you might need to pay an application fee or a deposit.

Any rating below 669 in this model is considered fair. Also, a rating between 580 to 669 is regarded as fair, while a rating below 580 is deemed poor or bad.

Some monetary institutions employ alternative FICO scoring models in addition to the FICO Score 8 model. Creditors may look at your FICO Auto Score if you apply for an auto loan. The scale for this rating goes from 250 to 900, with higher numbers indicating lower levels of risk.

The FICO system classifies credit ratings as follows:

  • Poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very Good: 740-799
  • Exceptional: 800-850

The average FICO rating in 2021 was 716, well inside the “good” category. A credit rating under 669 is considered to be in the poor or fair range, which is significantly below the average.

Bad Credit VantageScore

Another credit scoring technique that uses info from consumers’ credit records to generate a rating is called VantageScore. Just like FICO, VantageScore credit ratings can be anything from 300 to 850. However, it uses a somewhat different grading system. 

A bad credit rating can be differentiated from a very bad credit rating by using a service like VantageScore. According to the VantageScore model, a credit rating between 300 and 660 is bad, and a rating below 500 is regarded as very poor.

Credit ratings are categorized as follows per the VantageScore model:

  • Very Poor: 300-499
  • Poor: 500-600
  • Fair: 601-660
  • Good: 661-780
  • Excellent: 781-850

According to VantageScore, “generally speaking, persons with higher ratings can access more credit at better rates.” If your credit rating is below 600, you may have problems being approved for low-interest, high-limit credit cards.

In 2021, the average VantageScore was 698, which is within Vantage’s range of acceptable credit ratings.

What Are the Factors That Influence Your Credit Score?

The details contained in your credit record provide the foundation for your credit rating. Using info from the credit accounts you have opened in your name, the three major credit agencies (Equifax, Experian, and TransUnion) compile separate credit records.

According to the FICO model, there are five parts to your credit rating.

  1. History of Payments (35%): This shows how reliable you have been in the past with your credit card and loan settlements.
  2. Utilization of Credit (30%): The ratio of your existing credit balances to the total credit you have accessible is known as your credit usage ratio.
  3. Credit history (15%): Your credit history length is a major factor in asserting your credibility.
  4. Credit mix (10%): The mix of credit in your account. Having experience with both revolving credits like a credit card and installment loans like a car loan is reassuring to creditors.
  5. Credit applications (10%): The frequency with which you apply for new credit.

If you have a strong rating in four of the five categories, you can still get a loan if you have a bad credit rating in one. If you’re just getting started with credit, for instance, you might not have a long credit history or many different sorts of credit cards in your name.

You may still develop and sustain a solid credit rating if you pay your bills on time, don’t carry large balances, and don’t apply for too much credit all at once.

How a Bad Credit Score Can Affect You

Despite the fact that everyone’s circumstance is unique, you can get an idea of how bad credit ratings could affect you by considering some of the situations in which credit is relevant and where higher ratings could be advantageous.

  • Credit cards – If you work to raise your credit rating, you may be able to apply for cards with fewer or no fees and bigger credit limits.
  • Loans and mortgages – A better credit rating increases your likelihood of being approved for loans like mortgages, automobile financing, and more.
  • Rates of interest – The cost of borrowing money is known as interest. Having a higher credit rating can be helpful in many situations when trying to negotiate better interest rates.
  • Submitting an Application for a Rental – If you apply to rent an apartment, the landlord may check your credit record before deciding whether or not to rent to you.
  • Application for Employment – Credit reports are sometimes requested by prospective employers as part of the screening process. However, they must first seek your approval.
  • Cost of insurance policies – The cost of necessities like auto insurance may be affected by your credit history in some areas.
  • Deposits – If you have an excellent credit history, you may not need to put down a deposit when signing up for utilities or a cell phone plan.

That is merely a glance at the significance of credit. You can take action to raise your credit ratings if you are dissatisfied with where they now stand.

How to Improve a Bad Credit Score

Your credit rating can be improved in a variety of methods. It all comes down to being proactive and making sound monetary decisions on a daily basis. Here are some methods to improve your credit rating.

  1. Perform a credit check. To get started, visit for a free credit record and rating from each of the three major credit recording agencies. It is vital to dispute any inaccuracies and pinpoint the damaging info that is dragging down your credit rating before you can begin to make progress.
  1. Refrain from making settlements late. One of the best methods to create and maintain good credit is to pay your bills on time, as this factor accounts for thirty-five percent of your credit rating. You can avoid settling fees and interest by setting up automatic settlements for your bills.
  1. Reduce your credit utilization ratio. Thirty percent of your credit rating is determined by how much of your accessible credit you are really using. In general, you should not go beyond 30 percent of your credit limit, but the best credit-rating earners utilize even less than 10 percent.
  1. Become an approved user. You could ask a household member or close friend to make you an approved user on their credit card. Don’t worry about using the card or even asking for the account info; just reassure the person serving you that you don’t need to.

Why Does a Good Credit Score Matter?

Having solid credit opens up a lot of doors for you. The greatest direct perk is being able to get lower interest rates on loans.

An increase in credit rating from the range of 620-639 to 760-850 could result in approximately $200 in monthly savings, as reported by myFICO in May 2020. Indeed, that’s a major advance.

However, your credit ratings can have an impact on your life even if you have no plans to apply for a mortgage or any other sort of finance. Your insurance premiums, your ability to get a lease on an apartment, and even your chances of being hired could all be influenced by the details in your credit record.

There are numerous areas of your life that can be affected by your credit record and ratings; thus, it is in your best interest to maintain a close eye on both and respond promptly if you discover errors.

Bottom Line

A FICO credit rating below 669 or a VantageScore below 660 is deemed to be a bad credit rating. Don’t let the fact that your credit isn’t where you’d like it hold you back, even if it isn’t. 

Good news: there are easy things you can do that could instantly hike your credit rating. It’s vital to work on your credit because doing so can open doors and provide monetary perks.


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