What is a Bad Credit Score?

Ignorance might feel like bliss, but if you think your credit score might fall into the “bad” category, it’s better to find out sooner so you can start fixing the problem right away. Find out what lenders consider a bad credit score, plus how you can take control of your financing options today while proactively rebuilding your credit score to receive better offers in the future.

What is Considered a Bad Credit Score

According to FICO, the most popular credit scoring model available, a bad credit score (also called “very poor”) is anything ranging between 300 and 579. It’s difficult to obtain any type of credit when you’re in this category. Your credit report is likely full of negative entries such as late payments, large outstanding debts, accounts in collections, and maybe even more major financial events such as bankruptcy or foreclosure.

How does a bad credit score compare to the average American’s?

The average score in the U.S. is 703, so you have a bit of climbing to do before you reach that threshold. Here’s the breakdown of all the credit categories so you get a better understanding of what’s ahead:

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

If you’re at the top tier of the “very poor” category, it might not take as much work to bump up into the next category. Monitoring your credit score on an ongoing basis, especially while working to rebuild it, is a great way to track your progress. The better you improve your score, the more likely you are to be approved for credit applications with better interest rates. You can also eventually borrow larger amounts of money because lenders will trust that you’re willing and able to pay them back. 

Where to Get Your Credit Score

First, it’s important to distinguish between your credit report and your credit score. You can access your credit report for free from AnnualCreditReport.com once every 12 months. You actually have three credit reports, one for each major credit bureau. Access all of them at once, or just one at a time, it’s up to you.

Unfortunately, your credit score doesn’t come attached to your report. You’ll have to access through a separate service, which can cost money if you order it directly through FICO or one of the other credit scoring companies. To avoid that expense, check with your banking institutions and credit card companies to see if any of them offer credit score monitoring as a free service. It’s becoming an increasingly common perk, especially for primary credit cardholders. 

3 Ways to Quickly Improve a Bad Credit Score

Good financial habits like paying your credit card by the due date each month take time to rebuild your credit score. These three strategies, on the other hand, could potentially help you see a faster boost in your score. 

1. Pay Down Your Debt

If you have bad credit, chances are you have a large number of outstanding credit balances. When possible, pay off as much as you can without sacrificing your emergency savings fund. Beyond that, however, your primary focus should be funneling all of your extra money to those balances. Be strategic and pay down each one to get the account balance under 30% of your total available credit. You can see a quick jump in your credit score once you start erasing those high balances.

2. Become an Authorized User on Another Credit Card

For those who have a spouse, partner, close friend or relative who is willing to help you out, becoming an authorized user on their credit card could improve your score. Full disclosure: it can put your relationship at risk so proceed with caution. Here’s how it works.

You’re added to the person’s credit card as an authorized user. It’s up to them whether they actually want to give you a card that you can use for purchases. But it can help your credit score by adding another tradeline to your report, assuming the card has a low balance and positive payment history attached to it. It’s also helpful if the account has been open for a long period of time, because it extends your own credit history length. Of course, if your friend or relative makes late payments, that will impact your score as well.

3. Check for Credit Errors

Your credit score reflects all of the information listed on your credit report, so it’s wise to make sure all of that data is actually accurate. While you might not be able to remove legitimately incorrect entries, like recent late payments, you should still check to make sure balances and all of your other details are accurate. Reviewing your credit reports at least once a year can also alert you to potential identity theft and/or fraudulent accounts opened in your name — both of which can kill your credit score without you even knowing it.

How to Get a Loan with Bad Credit

Even with a low credit score, you’re not automatically out of the running to qualify for a loan when you need one. Of course, expect to receive more restrictive terms and higher interest rates, but that doesn’t mean you can’t find a deal that works.


You do have options to get a mortgage even with bad credit. The key is to focus on the right programs that are already tailored to your credit profile. An FHA loan is a perfect example of this. With a credit score of 580 or higher, you could still qualify and just pay a 3.5% down payment on your new home. Even if your score is lower than 580, you can still apply, you’ll just need a 10% down payment. 

VA loans and USDA loans are also worth exploring if you’re at the upper end of the bad credit range. Sometimes it just takes finding the right lender. Also, explore down payment assistance programs in your state or locale to minimize the amount of cash you need to bring to the table at closing.

Personal Loans

Personal loans get a little tricky when you have bad credit simply because it’s so easy to get yourself in a bad situation. Products like payday loans and title loans are out there, but rarely are they ever used in a way that benefits you in the long run (or even in the short run). Plus, the usually don’t even report your positive payments to the credit bureaus, so you’re not working to improve your score. There are lenders who offer unsecured personal loans for poor credit, but you’ll pay high-interest rates with a short repayment period, so be careful before using one of these options.

Secured Credit Cards and Credit Building Loans

Both of these tools are designed to be less predatory and help you reestablish your credit as you make payments. The downside is that both secured credit cards and credit building loans require a security deposit, typically the equivalent of your credit line or loan amount. On top of tying up that cash, you’ll still be charged interest. On the plus side, as long as you make your payments on time, you’ll build positive entries on your credit report.

What Else Creditors Consider

Getting approved for financing isn’t just about your credit score, although that does play a large role in the process. Lenders also look at your income and how much ongoing debt you’re already responsible for paying off month after month. 

This factor is called your debt-to-income ratio. Basically, lenders look at the number of minimum debt payments you have and divide it by how much money you make each month. This doesn’t include regular bills like your utilities or cell phone bill but takes into account monthly loan payments (such as a car loan and student loans) and any minimum credit card payments. 

The maximum DTI to get approved varies lender by lender. It also depends on the type of loan you’re seeking. In most cases, expect to keep your DTI under about 43% or so. If you earn $5,000 a month and pay $2,000 each month for your car payment, student loans, mortgage, and credit card minimums, then your DTI would be 40%. It’s on the line, but likely low enough to meet this specific qualification for the loan application process. 

If you have bad credit, that means you may need to work on paying down your debts so you can qualify based on this qualification as well. 

The Bottom Line

Having a bad credit score isn’t the end of the world, but it does mean you have some work cut out for you if you’re committed to improving that number. And with the amount of money (and opportunities) it can cost you to have bad credit, it’s certainly worth taking those extra steps to earn a better score. Nothing is permanent, so with some time and dedication, you’ll start to see noticeable improvements.