What Is A Bad Credit Score? How Do I Fix Bad Credit?

Have you ever wondered why your home loan application was approved or denied? Why does one person get a better car loan interest rate than another? Or why do landlords check credit scores before offering a lease?

Your credit score holds the answers to all such questions about a person's creditworthiness.

It’s a numerical summary of your credit history, financial reliability, and ability to manage debt. It influences major financial decisions—from loans and credit cards to renting an apartment or even securing a job.

A good credit score makes better financial opportunities available. A low credit score—often referred to as "bad credit"—can create countless hurdles along the way.

The good news? A poor or bad credit score isn’t permanent. With focused efforts (and assistance, if needed), you can improve your credit score.

Let’s find out what a bad credit score means, what leads to poor credit, how it affects you, and the steps you can take to fix it.

What is a Bad Credit Score?
A bad credit score indicates to lenders that you may pose a higher risk of not repaying a loan. Credit scores range from 300 to 850.

FICO and VantageScore are the two primary scoring models widely used in the United States. While these scoring models share similarities, they weigh factors slightly differently.

FICO: Scores below 579 are generally considered "poor" or "bad." Such credit scores signal to lenders that you’re a higher risk. Scores between 580 and 669 are considered "fair." The average U.S. FICO score in 2023 was 715 (in the “good” range).
VantageScore: According to this popular scoring model, credit cores between 300 and 499 are considered "very poor," while scores between 500 and 600 are "poor." Scores between 601 and 660 are considered "fair."

Which Factors Make Up My Credit Score?
Your credit score isn’t arbitrary—it’s calculated based on specific factors. Understanding these can help you figure out where to focus your efforts if you are keen to repair your credit or improve your credit score.

Payment History (35%):
This is the most critical factor. Lenders want to see whether you pay bills on time. Even one late payment can significantly hurt your credit score.
Amounts Owed (30%):
This factor measures how much debt you owe compared to your total credit limit (credit utilization ratio). Try to keep this ratio below 30%.
Length of Credit History (15%):
A longer credit history demonstrates that you have good experience in managing debt.
Credit Mix (10%):
A diverse mix of credit types (e.g., credit cards, mortgages, auto loans) indicates that you can handle different types of credit responsibly.
New Credit (10%): Opening too many accounts in a short time can hurt your score; for lenders, it can suggest that a consumer is experiencing financial instability.

What Can Hurt My Credit Score?

Late or Missed Payments: This is the most common reason for a bad credit score. Even a single missed payment can have a serious impact on your score.
Maxed-Out Credit Cards: High credit utilization suggests financial overextension.
Charge-Offs and Collections: Unpaid debts sent to collections can severely damage your credit. Both charge-offs and collections show up on your credit report.
Bankruptcy, Foreclosure, or Repossession: These negative events can stay on your credit report for years and severely damage your credit profile.
Too Many New Credit Applications: Multiple hard inquiries in a short time can make you look risky to lenders. Soft inquiries do not hurt your credit score.

How Does a Bad Credit Score Affect Me?
Lenders assess creditworthiness through hard or soft inquiries to ascertain whether borrowers are likely to repay loans. They evaluate if you’re a high-risk borrower or have a history of healthy financial habits. Consequently, a bad credit score can create hurdles in various aspects of life:

Difficulty Getting Credit: Approval for loans, credit cards, or mortgages becomes much harder.
Higher Interest Rates: If you do get approved for a loan, you’ll likely face higher interest rates. This will increase the cost of borrowing.
Limited Housing Options: Landlords often check credit scores, and a low score can make renting an apartment more difficult.
Job-Seeking Challenges: Employers in some states review credit reports. A bad credit score in such situations can impact your job prospects.
Expensive Insurance Premiums: A bad credit score can result in higher rates for auto and home insurance.

What Can I Do to Improve My Credit or Fix Bad Credit?
Improving your credit score requires consistency and patience. There is no shortcut to fixing bad credit or raising your credit score within weeks. Anyone promising such things is most likely running a scam. However, with the right strategies coupled with systematic credit repair, you can rebuild your credit and fix a bad credit score.

Here are some actionable steps to fix bad credit:

Track Your Credit Score and Analyze Your Report: Review your credit reports for errors at routine intervals and dispute inaccuracies.
Pay Bills on Time: Set up automatic payments or reminders to avoid late payments.
Reduce Credit Card Debt: Pay down high balances and aim for a credit utilization ratio below 30%.
Keep Old Accounts Open: Keeping older credit accounts open helps build a longer credit history.
Get a Secured Credit Card: Use it responsibly to rebuild your credit.
Apply for Credit Sparingly: Avoid multiple credit applications within a short period.
Consolidate Debt: Combining debts into one manageable payment can simplify repayment.

How Long Does It Take to Fix Bad Credit?

There’s no quick fix for bad credit. The timeline depends on the severity of the issues. For instance:

Minor Issues: Reducing credit card balances or fixing credit report errors can yield results within a few months.
Major Issues: Major events like bankruptcy can take years to recover from.

Consistency in good financial habits is key to long-term improvement in credit scores. With determination and consistent effort, you can rebuild your credit score and regain financial stability.

We have many years of experience in evaluating credit and guiding consumers to assert their legal rights. We do it every day! We guarantee honesty and dependability, virtues which most people seem to have forgotten.

Company

Home

Client Login

Pricing

Partner Program

Support

Contact Us

I agree to terms and conditions provided by the company. I agree to receive notification messaging from AMERICA CREDIT CARE at the phone number provided above. I understand I will receive up to 10 messages a month, data rates may apply, reply STOP to opt out.