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What Is Considered a Bad Credit Score? The Complete Guide



what is considered a bad credit score

About 53% of Americans have been turned down for a loan or a credit card because of a bad credit score. If you want to buy a home, get an apartment, or buy a car, your credit score will be pulled.

Your credit score affects your ability to get ahead financially, yet millions of Americans have poor credit scores. The more you can learn about your credit score, the easier it will be to bring that score up. That will bring more opportunities and help you dramatically improve your finances.

What is considered a bad credit score? Read on to find out and how you can get a higher credit score.

What Is Considered a Bad Credit Score?

Let’s take a look at how credit scoring works. There are credit reporting agencies in the U.S. These are Experian, TransUnion, and Equifax. When you have a loan, credit card, or bankruptcy, these things all get reported to the credit reporting agencies.

There are also credit scoring agencies. These companies take the information on your credit report and create a score to make it easy for lenders to determine your credit history.

The two main credit scoring agencies are FICO and VantageScore. They have slightly different scoring methods, so a bad credit score will be different according to which scoring agency you use. Most lenders still use FICO, but you should know the scoring methods of both.

Let’s take a look at FICO’s credit scoring scale.

  • 850 – 800: Excellent
  • 799 – 740: Very Good
  • 739 – 670: Good
  • 669 – 580: Fair
  • 579 – 300: Bad

As you can see here, anything below a 580 is a bad credit score. Lenders have different criteria for judging credit scores. You could have a 700 score, but still get turned down for a credit card or loan.

Many lenders consider 650 to be the cutoff point between a good and a bad credit score, even though FICO’s scale shows that 650 is a good credit score.

The scale is slightly different for VantageScore, but you can expect a similar story. Here’s the VantageScore credit scoring scale.

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

What you have to realize is that your credit score isn’t there for your benefit. It exists for companies to see if you’ll be a profitable customer or not. They want to know if you’ll pay your bills, pay them on time, and pay interest because that’s how they make money.

What Makes Up Your Credit Score

There are several components of your credit score. VantageScore and FICO take the same information from your credit score to create the three magic numbers. Where they differ is in how they weigh the information to calculate your score.

The big factors that make up your credit score are your credit utilization rate and payment history. Other things like recent credit checks or credit applications, length of credit history, and types of credit used have a smaller impact on your score, too.

Your credit utilization rate is the amount of credit you use against what you have available. In other words, if you’re closer to maxing out your credit, the higher the utilization rate and the lower your credit score.

The payment history is pretty simple. You have to pay your bills on time. One late payment will lower your score and stay on your credit report for years.

How to Improve Your Credit Score

Once you understand how credit works, it should become a little clearer as to how you can improve your credit score. There are certain steps that you can take to bring that number up.

You can have a great credit score but have a lot of debt that is hard to pay off. If that’s the case, you need to get a handle on it as soon as you can. Here are ways that you can pay down your debt and improve your credit score at the same time.

Check Your Credit Report

About 20% of Americans have at least one error on their credit report from one of the credit reporting agencies. You need to take a look at your credit reports to make sure that you don’t have any mistakes that can bring down your score.

You can pull your credit report from each of the credit reporting agencies once a year for free. Just go to

Something like a credit card taken out in your name could also be a sign of fraud that impacts your credit. You want to make sure that you check your credit regularly. There are many free services that allow you to track your credit.

Use a Credit Restoration Service

If your credit score is under 650, or if you have mistakes on your credit report, you should consider credit restoration services. These are services where you work with an agency that guides you through the process of raising your score.

They will help you remove mistakes from your report. They may also be able to remove late payments from your report as well.

This isn’t a magic bullet approach that will raise your score. It takes time and patience to do.

Get a Secured Credit Card

A secured credit card is a card that asks for a deposit before you take out the card. It’s used just like a regular credit card and you have to make your payments on time.

If you use the secured credit card, you can improve your score by raising your credit utilization rate and improving your payment history.

Have Bad Credit? Take Steps to Improve Your Credit Score Now

What is considered a bad credit score? Typically, anything below 650 is considered to be a bad credit score by lenders, no matter what scoring agency you use. A FICO score below 580 is bad, while VantageScore views anything under 600 as poor.

You can take measures to improve your credit score now. You can remove any errors from your credit report, work with a credit restoration agency, and pay down your debts on time. Each of these things will steadily bring up your score over time.

Are you looking to build your credit to get a mortgage? Head over to this article that outlines the difference between getting prequalified and preapproved for a mortgage.



Trevor Anderson wrote this article on behalf of FreeUp. FreeUp is the fastest-growing freelance marketplace in the US. FreeUp only accepts the top 1% of freelance applicants. Click here to get access to the top freelancers in the world.  

San Antonio and Hearst partners may earn revenue when readers click affiliate links in this article.

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Bad Credit

Loans Bad Credit Online – Loans Bad Credit Online – Reforming India’s deposit insurance scheme | Fintech Zoom | Fintech Zoom



Loans Bad Credit Online – Loans Bad Credit Online – Reforming India’s deposit insurance scheme | Fintech Zoom

Loans Bad Credit Online – Loans Bad Credit Online – Reforming India’s deposit insurance scheme | Fintech Zoom

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Bad Credit

Loans Bad Credit Online – Reforming India’s deposit insurance scheme | Fintech Zoom



The government’s incentive to step in and bail out depositors when banks fail is clear from past experience.

By Anusha Chari & Amiyatosh Purnanandam

The failure of the Punjab and Maharashtra Co-operative Bank (PMC) in September 2019 shone a light on the limitations of India’s deposit insurance system. With over Rs 11,000 crore in deposits, PMC bank was one of the largest co-op banks. That the Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance covered depositors, provided little solace when the realisation hit that the insurance amounted to a mere Rs 1 lakh per deposit.

The predicament of PMC depositors is, unfortunately, not an anomaly. Several bank failures over the years have severely strained RBI and central government resources. While co-operative banks account for a predominant share of failures, other prime examples include the Global Trust Bank and Yes Bank failures. These failures entail a direct cost to the taxpayer—the DICGC payment or a government bailout. More importantly, bank failures impose long-term indirect costs. They erode depositor confidence and threaten financial stability, presenting an urgent need for deposit insurance reform in the country.

A sound deposit insurance system requires balancing two opposing forces: maintaining depositor confidence while minimising deposit insurance’s direct and indirect costs. At one extreme, the regulator can insure all the deposits, which will undoubtedly strengthen depositor confidence. But such a system would be very expensive.

A bank with full deposit insurance has minimal incentive to be prudent while making loans. Taxpayers bear the losses in the eventuality that risky loans go bad. Depositors also have little incentive to be careful. They can simply make deposits in the banks offering high interest rates regardless of the risks these banks take on the lending side.

Boosting depositor confidence and reducing direct and indirect costs require careful structuring of both the quantity and pricing of deposit insurance. Some relatively quick and straightforward fixes could help alleviate the public’s mistrust while improving the deposit insurance framework’s efficiency.

India has made some progress on this front over the last couple of years. First, the insurance limit increased to `5 lakh in 2020. Second, the 2021 Union Budget amended the DICGC Act of 1961, allowing the immediate withdrawal of insured deposits without waiting for complete resolution. These are very welcome moves. Several additional steps could bring India’s deposit insurance system in line with best practices around the world. Even with the increased coverage limit, India remains an outlier, as the accompanying graphic shows.

The government’s incentive to step in and bail out depositors when banks fail is clear from past experience. However, these ex-post bailouts are costly. The bailout process also tends to be long, complicated, and uncertain, further eroding depositor confidence in the banking system. A better alternative would be to increase the deposit insurance limit substantially and, at the same time, charge the insured banks a risk-based premium for this insurance. Under the current flat-fee based system, the SBI pays144 the same premium to the DICGC—12 paise per 100 rupees of insured deposits—as does any other bank!

A risk-based approach will achieve two objectives. First, it will ensure that the deposit insurance fund of the DICGC has sufficient funds to make quick and timely repayments to depositors. Second, the risk-based premia will curb excessive risk-taking by banks, given that they will be required to pay a higher cost for taking on risk.

India is not alone in trying to address the issue of improving the efficiency of deposit insurance. The Federal Deposit Insurance Corporation (FDIC) recognizes that the regulatory framework governing deposit insurance is far from perfect and the United States is moving towards risk-based premia. The concept is similar to pricing car insurance premia according to the risk profile of the driver. The FDIC computes deposit insurance premia based on factors such as the bank’s capital position, asset quality, earnings, liquidity positions, and the types of deposits.

In India, too, banks can be placed into buckets or tiers along these different dimensions. The deposit premium can depend on these factors. It is easy to see that a bank with a worsening capital position and a high NPA ratio should pay a higher deposit insurance premium than a well-capitalized bank with a healthy lending portfolio. The idea is not dissimilar to a risky driver paying more for car insurance than a safe driver.

Risk-sensitive pricing can go hand-in-hand with the increase in the insured deposit coverage limits bringing India in line with its emerging market peers. In a credit-hungry country like India, these moves would build depositor confidence, possibly increasing the volume of deposits and achieving the happy result of the banking system channeling more savings to productive use.

Chari is professor of economics and finance, and director of the Modern Indian Studies Initiative, University of North Carolina at Chapel Hill and Purnanandam is the Michael Stark Professor of Finance at the Ross School of Business, University of Michigan

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5 Signs You’re Not Ready to Own a Home, According to a CFP



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The housing market has boomed over the last year, despite a global pandemic and millions of Americans struggling to make ends meet. 

Many people are spending less on entertainment, clothing, travel, and other discretionary purchases during COVID. Federal student loan borrowers have seen temporary relief from their loan payments. These expenses will most likely rise again after the pandemic, and many people who committed to a new home with a large mortgage will struggle to keep up. 

I often speak with clients and prospective clients who want to buy a home before they have a strong financial foundation. Buying a home is not only one of the largest purchases you’ll make in your lifetime, but it’s also a huge commitment that’s extremely hard to undo if you have buyer’s remorse

It’s important to make a thoughtful, informed decision when it comes to a home purchase. Before you take the plunge into homeownership, check for these signs that you’re not quite ready to buy. 

1. You have credit card debt

Credit card debt can be a drain on your monthly budget, and when combined with student loans and a car loan, it can lead to high levels of stress. 

Generally, more debt means higher fixed expenses and little opportunity to save for long-term financial goals. Your financial situation will only get worse with the addition of a mortgage. I always recommend that clients be free of credit card or other high-interest debt before they consider buying a home. 

To rid yourself of credit card debt, take some time to get a good handle on your cash flow. Take an inventory of your spending over the last six to 12 months and see where you can cut back. From there, develop a realistic budget that includes aggressive payments to your credit cards. 

There are several strategies to help you knock out credit card debt fast. Regardless of the method you choose, stick with the plan and track your progress along the way. Once you pay off your credit cards, you can allocate your debt payments to savings, which can help you avoid this situation in the future.  

2. You have bad credit

Bad credit is not only a sign that you may not be ready to take on a mortgage, it can also signal a high risk to

mortgage lenders
. A high-risk status results in higher interest rates and more strict requirements to qualify for a loan. A mortgage is one of the largest loans you’ll take out in your lifetime, and if you get behind on payments, you could lose your home. 

Just as with credit card debt, bad credit could be a result of past financial mistakes. Dedicating the time to repair bad credit and improve your credit score will help you beyond purchasing your dream home. 

Start by pulling a recent credit report from each of the three credit bureaus so you can review it for errors. Dispute any errors, address past-due accounts, and bring your overall debt balances down. It’s helpful to learn what has a negative effect on your credit score so you can avoid these mistakes in the future. 

3. You don’t have an emergency fund (or an inadequate one)

If you’re unable to save for a rainy day, you probably don’t have enough money to buy a house. Owning a home is a big responsibility, and unexpected expenses pop up all the time. In addition, you could lose your job, have a medical emergency, or another unexpected expense unrelated to the home. Maintaining an emergency fund is a good sign that you have discipline and are prepared for the responsibility of homeownership.

Many financial experts recommend saving at least six months of living expenses in an emergency fund. If you have variable income, own a business, or own a house, you should save more. To build an emergency fund, set money aside from each paycheck and automate transfers to make the process easier. Give your emergency fund a boost when you receive lump sums such as bonuses or tax refunds. Start by saving one month of living expenses and build from there. 

4. You don’t have separate savings for your home

I always advise clients to set aside savings for a home in addition to an emergency fund. It’s a bad idea to start homeownership with no savings. Whether you have unexpected expenses related or unrelated to the home, having no emergency fund after a home purchase will lead to unnecessary stress — and possibly more debt. 

When purchasing a home, you’re responsible for a down payment and closing costs. While a 20% down payment is ideal to avoid private mortgage insurance, a down payment of at least 3.5% is typically required. Closing costs can range from 2 to 5% of the home’s value. 

Also, you will have moving costs, costs to spruce up your new place (like new furniture or light cosmetic updates), and any initial maintenance and repairs. Be sure to budget for these items to know how much to save on top of your emergency fund. It doesn’t hurt to boost your emergency fund, too, in preparation for homeownership. 

5. You have a low savings rate

It’s much easier to develop good savings habits before you have a lot of responsibilities. To get on track for financial independence, several studies show that you should save at least 15% of your income. The longer you wait, the more you’ll need to save. 

If your savings rate is low before you purchase a home, it will most likely worsen after becoming a homeowner. Even if your mortgage is similar to your rent, ongoing maintenance and repairs, higher utilities, and homeowners association fees can wreak havoc on your budget. 

Take a look at your current savings rate and see if you’re on track for financial independence. If you’re saving less than 15 to 20% of your income, work to improve your savings rate before you consider buying a home. A strong savings habit can help you build your home savings fund faster and ensure that a home purchase doesn’t impede your long-term financial goals. Finally, understand how much house you can afford so you can avoid being house poor. 

Buying a home can be rewarding, and when done the right way, it’s a way to build wealth. Before you decide to buy a home, it’s important to understand your numbers and ensure that you’re ready for the commitment. Without preparation, your dream home could be detrimental to your long-term financial goals.

Chloe A. Moore, CFP, is the founder of Financial Staples, a virtual, fee-only financial planning firm based in Atlanta, Georgia and serving clients nationwide.

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