Although the three credit bureaus technically determine your score, each lender has its own guidelines according to the level of risk it’s willing to take.
According to FICO, a credit score below 580 is considered “poor,” and a score that ranges from 580 to 669 is “fair.”
But there’s more to it than that – depending on what you’re trying to obtain credit for, a “bad” credit score might be lower (or higher) than you think.
Keep reading to get the experts’ takes on what constitutes a bad credit score and see how yours stacks up.
See related: What is a good credit score?
Who determines what a bad credit score is?
The three major credit bureaus – Experian, Equifax and TransUnion – calculate your credit score with all of the data they have about you.
“But any lender or financial institution that is responsible for extending credit will ultimately determine what a good or bad credit score is,” said James Lambridis, founder and CEO of DebtMD, a fintech platform that connects people with professionals to help them become debt-free.
Most companies set their own guidelines when it comes to credit scores, but keep in mind that they are typically guidelines, not rules, said Lisa Torelli-Sauer, editor at Sensible Digs.
“That means nothing is written in stone,” she added, “and other factors, such as income and recent life circumstances, can also be considered.”
For example, according to Todd Christensen, an accredited financial counselor and editor at the website MoneyFit, a 615 credit score might indicate too much of a risk for lender ABC to approve a loan. But lender XYZ may want to take greater risks (tied to higher interest rates and therefore higher rewards), so it might approve a loan for someone with a 575 credit score.
So, in the eyes of ABC, 615 is a bad credit score, but for XYZ a bad credit score is below 575, he noted.
The effects of a bad credit score run deep
A bad credit score can result in higher interest rates on your mortgage, car loan and credit cards. It can also affect you in other areas such as renting an apartment or purchasing a cellphone plan.
“While your credit score may seem to be just a number, not maintaining it can cost you hundreds, if not thousands of dollars in the long run,” Lambridis said.
Bill Samuel, a landlord who works for Blue Ladder Development, said that if your score is below 650 you’re going to have an “incredibly difficult time finding a quality place to rent.”
And a bad credit score can even affect the amount of any security deposits you might owe when renting an apartment or connecting utilities.
Additionally, car and truck insurance – as well as homeowners and private life insurance monthly premiums – typically go up if you have a lower credit score, Christensen said.
“And more and more banks and credit unions are using your credit scores in their decisions to approve your application for a new checking account,” he added.
Although your score is not used during any sort of hiring or job interview process, Christensen said, your credit report can be, and a lower credit score indicates there is negative activity on your report.
What hurts your credit score?
Your FICO credit score is broken down into categories: payment history, credit utilization rate (how much credit you have available compared to how much credit you are currently using), length of credit history, mix of credit types and new credit.
From missing payments to filing bankruptcy to maxing out your credit card to carrying large balances, there are many ways to damage your credit score, Christensen said.
Having too much debt and high utilization rates will cause your credit score to go down, Lambridis said, but one thing that can really hurt your score is missing a payment.
Late payments can have a severe negative impact on your credit and typically remain on your credit report for seven years.
In addition, applying for too much credit at the same time triggers multiple hard inquiries and can ding your score.
So, if you’re thinking of applying for new credit lines to increase your credit utilization ratio, think hard, Torelli-Young said.
“From a lender’s perspective, too many new loan accounts can signal financial trouble.”
Closing accounts can also hurt your score, landlord Samuel said. It lowers your total available credit, which can increase your credit utilization, resulting in a lower score.
Your creditworthiness isn’t just your score
“I think often we confuse creditworthiness and credit scores,” said Dino Selita, president and co-founder of The Debt Relief Company.
For example, Selita said, if your debt-to-income ratio is too high, your exceptional credit score may not mean much to your lender and you still might not get great terms on a mortgage.
“In my opinion, someone who has an extremely low debt-to-income ratio and great loan-to-value ratio (the ratio between the loan amount and the value of the asset securing the loan) is sometimes more creditworthy than a consumer with a great credit score and not as great ratios,” he said.
See related: What does being creditworthy really mean?
Jumpstart your credit score before applying for credit
Now that you know what is a bad credit score is ultimately determined by the lender, it’s important to get your score as high as possible before you start applying for credit.
Valerie Moses, senior relationship manager at Addition Financial Credit Union, said that because the amount you owe makes up 30% of your credit score, reducing debt can have a positive effect on your credit score.
And it’s important to keep an eye on your credit report so that you can protect yourself from identity theft, which can wreak havoc on your score.
Due to the COVID-19 pandemic, you can now request a free copy of your credit report from all three credit bureaus at AnnualCreditReport.com once a week.
“Be sure to look through the report to confirm that all information is accurate and that nothing has been opened in your name without your consent,” Moses cautioned.
Above all, make your payments on time, pay your card balances in full if possible, shoot for a healthy mix of credit types and avoid applying for credit lines you don’t really need. These habits will keep your credit score well within the range of good-to-excellent.