What Does My 650 Credit Score Mean? (2022)

What is a credit score, anyway?

In the simplest terms, a credit score is a number that rates your creditworthiness. In essence, it’s how trustworthy lenders perceive you to be with money.

It’s calculatedby the data contained in your credit history.

The factors taken into account when calculating your credit score are:

  • Payment History
  • Amounts Owed
  • Length of Credit History
  • New Credit
  • Credit Mix

Who decides this?

The credit rating system most widely used in the US is devised by the Fair Isaac Corporation.

You might know it as yourFICO score.

There are other credit scoring systems used by various lending institutions. But when someone says “credit score,” they are most likely referring to your FICO score.

What’s it used for?

Lending agencies use your credit score to decide whether or not to lend you money.

To them, your credit score is an indicator of how much of a financial risk they’re taking in lending money to you.

So anytime you apply for a credit card, mortgage, personal loan, etc. they will ultimately use your credit score to make a decision.

(Video) Is a credit score of 650 good?

What does it mean?

Credit scores are measured on a scale from 300-850, where 300 is as bad as it gets and 850 is the most desirable. Different lenders have different criteria and interpret the scores differently, but as a rough rule:

300-599 is perceived as very bad credit. Most lenders will consider you a very high risk.

600-649 is considered “poor.” Obtaining credit is not inconceivable. If you do get succeed in convincing a lender to loan to you, the costs will be higher.

650-699 is “fair.” You’re not seen as much of a credit risk, so loans will be easier to come by. They’ll still have more strings attached than you would at a higher credit score though.

700-749 is “good.” Most lenders will lend to you without too much difficulty.

750-799 is “very good.” Give yourself a pat on the back, you’re in great financial shape.

800-850 is classified as “excellent.” This is the Gold Standard for credit scores. An 850 score will have lenders falling over themselves to lend to you. You’re essentially perceived as a risk-free bet.

To put this into some sort of perspective, the average FICO score in the U.S. currently stands at 695. This is at the top end of fair, and bordering on good. However, this isn’t the full picture.

As we can see here, the bulk of people are actually on the low end of the spectrum. The scores of those at the very top are bringing the average up. These statistics show the median range of credit scores to be closer to the “poor” range.

(Video) What's a good credit score? (UK)

But why does any of this matter?

Well, it depends on what your credit score tells your prospective lender about you.

So, just how does a lender see my score?

Basically, lenders use credit scores as an indicator of how much risk they are taking.

Someone with a high score is relatively risk free.

The lower the score, the higher the risk. And with higher-risk lending, the lenders need to insure themselves against possible losses further down the line. To do this, they need to make more money from those borrowers with lower credit scores. This helps them cover themselves when one of them defaults. They do this by charging higher interest rates on loans at lower credit levels.

Check out the infographic below for more details:

Interest rates?

Interest rates are, in essence, how lenders make their money. In the simplest terms they are expressed as a percentage of the amount you want to borrow. Over time, interest rates can make a big difference to how much money a loan is going to cost you.

How big of a difference can interest make?

Imagine a loan of $10,000, repayable over ten years. At an interest rate of 3% you’ll pay a total of $3000 in interest. So a total of $13,000. But if that interest rate is, say, 6%, that loan is going to end up costing you $16,000. It’s in your interest, so to speak, to get the lowest one possible.

(Video) Is a credit score of 650 good or bad?

What difference your credit score makes

As I’ve already explained, lenders use your credit score to determine your creditworthiness, and how much interest they’re going to charge you on your loan.

Those with the highest credit scores represent the least risk, and are accordingly charged the lowest interest rates.

Those with lower credit scores are more of a risk to the lender, and are charged much higher interest rates. This is because the lender has to cover themselves in case of the borrower defaulting, at which point the lender loses their money.

Typically, the interest rates on a mortgage can differ by 1%-1.5% depending on your credit rating. Over the lifetime of a mortgage, this can make a big difference.

If you purchase a home for $200,000 and take out a 30 year mortgage, a good credit rating could save you over $40,000 in interest. Click to tweet

When it comes to auto loans, it’s a similar story. Let’s say you’re looking for an auto loan of $20,000. If you use anauto-loan calculatorand rate your credit as “fair,” your best interest rate offer is 3.19%. When the same is done, but with a “good” credit rating, the interest rate drops to 2.24%.

The similarities continue when it comes topersonal loans. And the amount that you are able to borrow also varies widely. If you have a credit rating below the “fair” level, APRs can be eye-wateringly high, up to 2330%. Yes, you read that right.

Plus, the amount that you’ll be able to borrow will vary based on your credit score.The overall picture is that borrowing is a much easier and cheaper affair the higher your credit rating is.

Best Credit cards for a 650 Credit Score

But if you’re one of the majorities of people in the “fair” credit category, this need not be a barrier to you being able to get credit; many credit cards cater to those with a credit score around the 650 mark.

The key thing to remember when applying for credit cards is to keep an eye on the interest rate and other charges. Some charge an annual fee. It’s also worth keeping an eye on what other services they may offer you. Here’s our pick of some of the best cards for those with an average credit rating of 650:

(Video) YOUR CREDIT SCORE DOESN'T MEAN SH*T, HERE'S WHY! (EXPERIAN)

Capital One’s Quicksilver One has an APR of 29% and an annual fee of $39. One benefit of this card is 1.5% cash back on purchases made on the card. There is also the chance of an extension to your credit line with regular repayments.

The Credit One Platinum Visa offers 1% cash back. The APR and fee vary between 15.65%-24.15% and $0-$99 depending on your score, but there is the opportunity to see if you pre-qualify without harming your credit score.

The Indigo Platinum MasterCard also offers the chance to pre-qualify without impacting your credit score, with an APR of 23.9% and a variable fee.

The Capital One Platinum card has the same APR as the Quicksilver, 24.99% but, crucially there’s no annual fee. However, it doesn’toffer any cash back.

How to raise your credit score

Raising your credit score, as we have seen, gives you access to better terms at lower rates. For example, all the credit cards above have an APR above 20%. If you can get that credit rating up to 750, the APR drops sharply, with some cards offering as little as 8%. Loans and mortgages also come cheaper.

So how do you go about building that credit score? Well, there are a number of ways. Responsible credit card use is a good and easy way to build credit. Regular repayments on a credit card show you to be a responsible person, and your credit score will slowly increase over time.

It’s important to remember that there’s no quick fix for this, building credit is a time-consuming process.

Good credit scores arise from long histories of regular repayments.

It’s best to have just one or two cards that you use for purchases, even if the balance is slightly higher. A number of cards with small balances will adversely impact your credit score.

Do some financial spring cleaning: ensure you pay your bills on time, and bring your overall level of debt down. Don’t close any cards on which the balance is cleared. Remember that a large part of your credit score is your successful payment history, so closing successful accounts is rather like getting a good grade in school, and then throwing the test in the trash.

(Video) INCREASE Your Credit Score in 30 Days | How to Increase Your Credit Score

Raising your credit score is a time-consuming process, and requires discipline. But if you stick with it, over time that credit score will increase. And as it increases so do your opportunities for good credit, and the terms of your borrowing will become easier.

So stick at it, you’ll get there in the end.

FAQs

What Does My 650 Credit Score Mean? ›

A FICO® Score of 650 places you within a population of consumers whose credit may be seen as Fair. Your 650 FICO® Score is lower than the average U.S. credit score. 17% of all consumers have FICO® Scores in the Fair range (580-669) .

What will a 650 credit score get me? ›

A 650 credit score can be a solid platform for getting the house you need. It can help you qualify for a mortgage, but it'll likely be one that carries a fairly steep interest rate. It's also a score you can build on to help you get a more affordable loan, today or in the future, when you refinance or buy a new home.

How high of a loan can I get with a 650 credit score? ›

Lenders will usually offer an FHA loan to someone with a credit score as low as 500, as long as they can put down 10%. With a credit score above 580, you could qualify for a down payment as low as 3.5%.

What percentage of people have a 650 credit score? ›

Your score helps lenders decide whether you qualify for products like credit cards and loans, and what interest rate you should pay. The share of Americans with a score below 650 was nearly 25% as of April 2021, according to credit scoring company FICO.

How long does it take to go from 650 to 750 credit score? ›

It will take about six months of credit activity to establish enough history for a FICO credit score, which is used in 90% of lending decisions. 1 FICO credit scores range from 300 to 850, and a score of over 700 is considered a good credit score. Scores over 800 are considered excellent.

How can I raise my credit score from 650 to 700? ›

How to Bring Your Credit Score Above 700
  1. Pay on Time, Every Time. ...
  2. Reduce Your Credit Card Balances. ...
  3. Avoid Taking Out New Debt Frequently. ...
  4. Be Mindful of the Types of Credit You Use. ...
  5. Dispute Inaccurate Credit Report Information. ...
  6. Don't Close Old Credit Cards.
Feb 7, 2021

Can I buy a car with 650 credit score? ›

If you're getting ready to start the car financing process, you might wonder, “Is 650 a good credit score for a car loan?” The answer isn't a simple yes or no. Depending on your lender, a 650 might be considered “Good” or just “Fair” – which can affect just how smoothly your auto financing process goes.

Can u buy a house with a 650 credit score? ›

If your credit score is a 650 or higher, and you meet other requirements, you should not have any problem getting a mortgage. Credit scores in the 620-680 range are generally considered fair credit. There are many mortgage lenders that offer loan programs to borrowers with credit scores in the 500s.

Is a 700 credit score good? ›

FICO credit scores, the industry standard for sizing up credit risk, range from 300 to a perfect 850—with 670 to 739 labeled “good,” 740-799 “very good” and 800 to 850 “exceptional.” A 700 score places you right in the middle of the good range, but still slightly below the average credit score of 711.

What credit score is needed for a 10000 loan? ›

You will likely need a credit score of 640 or higher to get approved for a $10,000 personal loan. Most lenders that offer personal loans of $10,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.

What is a good credit score to buy a house? ›

A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.

What credit score do u start off with? ›

Since everyone's credit journey is different, there's no one standard score everyone starts out with. You won't start with a score of zero, though. You simply won't have a score at all. That's because your credit scores aren't calculated until a lender or another entity requests it to determine your creditworthiness.

Is an 800 credit score good? ›

Having a credit score over 800 isn't just good. According to the FICO credit scoring system, it's exceptional. Although both the FICO and VantageScore credit scoring systems go all the way up to 850, you actually don't need to hit 850 to reap the same benefits as those with a perfect credit score.

How can I raise my credit score 40 points fast? ›

Quickly Increase Your Credit Score by 40 Points
  1. Always make your monthly payments on time. ...
  2. Have positive information being reported on your credit report. ...
  3. It is imperative to drop credit card debt altogether. ...
  4. The last thing you can do is check your credit report for inaccuracies.

How do you get an 800 credit score? ›

How to Get an 800 Credit Score
  1. Pay Your Bills on Time, Every Time. Perhaps the best way to show lenders you're a responsible borrower is to pay your bills on time. ...
  2. Keep Your Credit Card Balances Low. ...
  3. Be Mindful of Your Credit History. ...
  4. Improve Your Credit Mix. ...
  5. Review Your Credit Reports.
Mar 12, 2022

How can I raise my credit score 100 points? ›

How to Improve Your Credit Score
  1. Pay all bills on time.
  2. Get caught up on past-due payments, including charge-offs and collection accounts.
  3. Pay down credit card balances and keep them low relative to their credit limits.
  4. Apply for credit only when necessary.
  5. Avoid closing older, unused credit cards.
Mar 11, 2021

How many points does credit go up a month? ›

The average consumer saw their FICO Score 8 increase by 12 points using Experian Boost, according to Experian. When it comes to getting your rent reported, some RentReporters customers have seen their credit scores improve by 35 to 50 points in as few as 10 days, according to the company.

How can I fix my credit score quickly? ›

Here are some strategies to quickly improve your credit:
  1. Pay credit card balances strategically.
  2. Ask for higher credit limits.
  3. Become an authorized user.
  4. Pay bills on time.
  5. Dispute credit report errors.
  6. Deal with collections accounts.
  7. Use a secured credit card.
  8. Get credit for rent and utility payments.

Does paying bills build credit? ›

If you keep up with your utility and phone bills and that activity is reported to credit bureaus, it could help boost your credit. But keep in mind, those bills are just one possible factor in credit scoring. And falling behind on them or other bills could have negative effects.

Can I get home loan with 650 credit score? ›

A score ranging between 650 and 749 is considered good, and lenders may offer you a home loan after inquiring into your other financial details. However, lenders usually consider 650 as the minimum CIBIL score required for a home loan.

What credit score is needed for a 10000 loan? ›

You will likely need a credit score of 640 or higher to get approved for a $10,000 personal loan. Most lenders that offer personal loans of $10,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.

What is a good credit score to buy a house? ›

A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.

How much loan can I get with a 680 credit score? ›

If you have a credit score of 680, the maximum amount you can borrow for a personal loan is $100,000. $100,000 is the maximum loan amount for personal loans no matter what your credit score is.

What credit score do u start off with? ›

Since everyone's credit journey is different, there's no one standard score everyone starts out with. You won't start with a score of zero, though. You simply won't have a score at all. That's because your credit scores aren't calculated until a lender or another entity requests it to determine your creditworthiness.

Is a 700 credit score Good? ›

FICO credit scores, the industry standard for sizing up credit risk, range from 300 to a perfect 850—with 670 to 739 labeled “good,” 740-799 “very good” and 800 to 850 “exceptional.” A 700 score places you right in the middle of the good range, but still slightly below the average credit score of 711.

How can I quickly raise my credit score? ›

4 tips to boost your credit score fast
  1. Pay down your revolving credit balances. If you have the funds to pay more than your minimum payment each month, you should do so. ...
  2. Increase your credit limit. ...
  3. Check your credit report for errors. ...
  4. Ask to have negative entries that are paid off removed from your credit report.

Videos

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2. True Benefits Of Having A Good Credit Score
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3. WHAT CAN A 700 CREDIT SCORE BUY?
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4. What credit score do I need to buy a house / mortgage? (FICO Scores for Standard & FHA Home Loans)
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5. How To Quickly Increase Your Credit Score
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6. Can I buy a house with a 650 credit score?
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