A credit score is one of those numbers that shape your financial life and you should cherish it. It affects things such as whether you can obtain credit cards and loans to the interest rates that are attached to the credit that you apply for. But where does a 600 Credit score rank – is it a bad credit score or an average credit score? Perhaps, it is high time we considered these statistics a little more closely.
Credit Score is a numerical representation of an individual’s creditworthiness which is given by various credit bureaus.
A credit score is a numerical representation of an individual credit score ranging from 300 to 850 that is determined by the details of the credit reports. The primary credit scoring model is FICO, developed by Fair Isaac Corporation. FICO scores take into account factors like:
Credit history has to do with your ability to meet your contractual obligations on time. This contributes to your score and forms a rather large percentage of the overall score.
Credit utilization – this is the amount of money that you have borrowed out of your credit limit. Lower percentages are better.
Length of credit history – longest is always best as this implies that you have a favorable record in credit history.
A variety of credits - As it was mentioned in the previous point, having credit cards, installment loans, or mortgages may be helpful.
New credit – Applying for new credit accounts frequently is noted as a bad practice as it can affect your score.
When possible, this shows to the lenders that you are a responsible borrower who pays back the credit as agreed. The scale was reverse scored; therefore, a higher number of points represents a lower extent of risk.
Here we go to the major question that is frequently asked by so many people: ‘’What is considered a bad credit score’’
Generally, credit scores fall into the following ranges:
800-850: Exceptional
740-799: Very Good
670-739: Good
580-669: Fair
300-579: Poor
Therefore, at 600 your credit score is somewhat below the FICO’s “fair” Credit rating category. Most of the lending companies do consider credit scores below this range as having bad credit. On average borrowers with scores in this bracket are forced to turn to “bad credit loans” which attract high rates of interest.
Those with poor credit often have to deal with:
This can be attributed to the increased inflation rates and growth in the global interest rates which leads to higher interest rates on loans and credit cards.
- Reduced likelihood of securing credit or funding
- Measures such as high down payment, which are a result of the implementation of the new lending protocols.
- Problematic credit histories that keep an individual from obtaining better rates and rewards.
So while 600 may not be the worst of the worst when it comes to credit scores it is indeed on the bad side of things as far as most creditors are concerned. Borrowers in this score range will incur much higher costs of credit over the durations compared to the very good or exceptional scores.
Some things that can be done to raise a 600 credit score include the following:
The good news is that one can undertake some tangible efforts to raise a 600 credit score. To see changes, one will have to work and be keen on their reports and based on experience and reports shared, results could start showing after 6 months to a year. Here are some tips that will help you get from a 600 score to a higher level:
Pay All Bills on Time: The three major credit-scoring factors in most models are Payment history. The remaining recommendation is to ensure that there are automatic payment systems, or automatic payment reminders to avoid cases of delayed payments. When it comes to paying existing accounts, it is positively affected.
Lower Credit Utilization: Maintain credit card balances at their lowest, and most, do not exceed the 30% utilization rate. These higher balances are still painful, even if you manage to pay off your balance in full every month. It is possible to cut the balance more frequently throughout the month before your statement is cut to reduce this.
Don't Close Old Credit Cards: This is a blow to those people who have closed their old accounts with credit card companies because that reduces your score. To maintain a good credit standing, it is advisable to leave these accounts open but avoid charging them.
Monitor Credit Reports: It is wise to check your credit reports periodically, and if there are errors on the reports, then you can contest with the bureaus. This means that you can be penalized at any single aspect of the game even when the mistake made is very trivial.
Limit New Credit Applications: Every application leads to a hard inquiry on the credit reports. An impact of new applications is credit risk and a large number of new applications in a short period increases credit risk. That is why one should apply for new credit only if it is necessary.
It is not hard to get a better score if one has a below-average 600 credit score, however, it requires consistency and effort. To move up the credit score ladder, therefore, you need to track your credit reports, ensure that credit balances you carry are as low as possible, and maintain healthy credit behaviors.
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