650 Credit Score: What It Means for You And How To Reach It
Credit scores take time to establish and improve. It can take months or even years to reach the "golden" score of 760+. But there are milestones along the way that can help you financially and should be celebrated.
That's what this series is about, and today, we'll discuss a 650 credit score, what it means for you, and how you can get there.
Credit score ranges
These are the credit score ranges:
300 to 579: Poor
580 to 669: Fair
670 to 739: Good
740 to 799: Very Good
800 to 850: Excellent
650 credit score
A 650 credit score puts you in the Fair range; 17% of all consumers have a Fair credit score. The average score is 714, which is in the Good range. While a 50-point jump in your credit score from 600 to 650 is a great improvement, it can be disappointing to see that it doesn't bump you up to the next range.
And statistically, 28% of consumers with credit scores that fall in the Fair range are likely to become "seriously delinquent" in the future. This can give lenders pause when considering potential borrowers with scores in the Fair range.
Those in the Fair range are eligible for traditional rather than secured credit cards, which is a win! Secured credit cards rarely offer perks like cash back, often come with fees, and have relatively small credit limits, which typically have to be backed by the cardholder's own cash.
With a 650 credit score, you'll also be eligible for various types of loans, including home loans. There are some special programs aimed at helping those with Fair credit scores buy a home.
Though, if you don't qualify for any of those programs and apply for a mortgage through a traditional lender, you will be subject to fees and higher interest rates than borrowers with higher scores.
And that matters. Even a small difference in interest rates can mean saving tens of thousands of dollars when you're making a big purchase like a home. Here's an example:
You buy a home for $100,000 with a 20% downpayment, so you borrow $80,000 with a 30-year term at:
6% interest
7% interest
The interest on the loans is:
6%: $92,670.55
7%: $111,607.12
So including the principal of $80,000, the total cost of the loan was:
6%: $172,670.55
7%: $191,607.12
All the more motivation to continue your credit journey!
Reaching a 650 credit score
If your score is not yet at 650, you can take steps to get there.
Upwardli
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Check your credit report
If you're getting close to a 650 credit score, you've likely had enough credit history that it's possible there are errors on your credit report. Credit report errors are not uncommon. They can be caused by a number of things; entry errors, an entry on your report that belongs to someone with a similar name, date of birth, Social Security number, or ITIN to yours, or identity fraud.
Errors on your credit report can hurt your score. You can get a free copy of your report at annualcreditreport.com. If you find incorrect information, you can dispute it.
Keep utilization low
Utilization is how much credit you're using compared to how much you have in total, and it is the second biggest factor in your score, accounting for 30%. It's commonly recommended to keep your utilization at 30% or under, but the lower, the better.
And when it comes to credit cards, ideally, the full balances are paid off each month. Not only does this help your credit score, but it means you're not paying interest either, and the interest rates on credit cards can range from the teens to well into the 20s.
In our next article, we will discuss the next credit score milestone, a 700 score.