A bad credit score could keep you from qualifying for loans and credit cards, but you don’t have to stay in “poor credit jail.” Follow the tips below to improve your credit score.

You may not think it’s a big deal, but a bad credit score can turn your life upside down in ways you don’t realize. Think about your daily life — where you live, what you drive, where you work — these can all be affected by a low credit score. 

The good news is a bad credit score is something you can fix, although it takes time and careful planning. Maybe you don’t know your credit score or whether it’s good or bad. That’s okay — this guide will walk you through what a bad credit score is, the ways it can affect your everyday life, and what you can do to fix it. 

What is a bad credit score?

What Is A Bad Credit Score? (And How To Improve Your Score) - What is a bad credit score?

A credit score is a number used by lenders and other companies to determine your creditworthiness or how likely you are to repay a loan or pay your bills on time. Lending or renting to individuals is a risk. A credit score helps lenders and creditors understand your risk level before they enter into an agreement. 

FICO credit scores range from 300 to 850. A bad credit score typically is a score below 660. Credit scores are divided into ranges, with bad credit scores ranging from fair to very poor:

Excellent 781-850
Good661 - 780
Fair601 - 660
Poor500 - 600
Very Poor300 - 499

Some lenders or industries rely on different types of scores to make decisions, but for the most part, these are the ranges you should consider in relation to your credit score. 

How a bad credit score affects you

Unfortunately, having a bad credit score can affect not just your financial life, but also where you can live, work, and shop. Here are some of the ways having a bad or low credit score can affect you: 

Securing a loan is more difficult

A low credit score sends up red flags to lenders that you are a lending risk. Bad credit makes it infinitely harder to prove that you are worthy of approval for a mortgage, auto loan, or other loan products. 

Higher interest rates

If you still qualify for a loan or line of credit, chances are you will end up with much higher interest rates than someone with good credit. Higher interest rates mean that you’ll pay more interest over your loan term unless you have funds to pay it off early. Depending on the type of loan, you could end up paying thousands of dollars more than you would if you have good or excellent credit

Fewer options renting an apartment

If you’re on the hunt for a new house or apartment to rent, your low credit score could put a damper on your search.

Landlords and property management companies want to rent to responsible tenants. They use credit checks to determine your ability to pay rent. Poor credit could mean having your application denied or putting down a larger security deposit to secure an apartment. 

Higher insurance premiums

Insurance companies sometimes run credit checks when setting premiums. They may also use a credit-based insurance score that’s based on your information from your credit report. The report will reveal the reasons for your low credit score, and you could end up paying significantly higher premiums than you would with good credit.

Trouble purchasing a cell phone

Mobile providers use credit checks to approve new contracts. Your bad credit score makes you a high-risk customer with most providers. Poor credit could mean saying goodbye to the latest iPhone or Galaxy with unlimited data and hello to a prepaid phone plan.

A harder time landing a job

In some states, employers are allowed to run credit checks on prospective employees during the hiring process. Jobs in finance or management that require handling large sums of money are prime candidates for credit checks. You may have a hard time convincing a company to trust you with their money if your credit report reveals a history of poor financial decisions. 

You won’t qualify for most credit cards

Having a credit card might seem like a rite of passage, but there’s no guarantee that you’ll be approved if you have a bad credit score. Most rewards credit cards that earn points, miles, or cash back or come with travel and other perks require good to excellent credit. 

There are some credit cards for people with bad credit, but they are few and far between and don’t offer the same level of benefits. You could also resort to a secured credit card, which relies on a security deposit instead of a credit check to secure the card. Secured credit cards typically have lower credit limits and high interest rates. 

Related: Best Secured Credit Cards

How credit scores are calculated

What Is A Bad Credit Score? (And How To Improve Your Score) - How credit scores are calculated

In most cases, when someone talks about credit scores, they are referring to your FICO score. The FICO credit scoring model was created by the Fair Isaacs Corporation. It’s a three-digit number, ranging from 300 to 850, that gives a snapshot of your credit and your risk level as a lendee or customer. Five factors go into calculating FICO credit scores: 

  • Payment history (35%). Vendors report your payments to credit bureaus. Late payments stand out like a sore thumb on credit reports and make you more of a lending risk. 
  • Amounts owed (30%). Creditors also look at how much on your available credit you’re using at any given time. Using a higher percentage of your available credit creates a picture of someone at risk of defaulting on payments because they are overextended. 
  • Length of credit history (15%). The length of your credit history looks at factors like how long your accounts have been open, the age of your newest account, and the average age of your credit accounts. Each time you open a new account, your credit age may drop. 
  • Credit mix (10%). The type of credit accounts you have open is factored into your FICO score too. Credit types can include mortgage loans, installment loans, credit cards, retail credit accounts, and other financial accounts. 
  • New credit (10%). New credit refers to any time you open a new credit account, or someone runs a hard credit check. 

Several FICO score models exist, including models for specific industries like auto lending and mortgage lending. FICO Score 8 is the most widely used credit scoring model. 

The difference between VantageScores and FICO scores

FICO isn’t the only scoring model. VantageScore is another model used by lenders to determine creditworthiness. VantageScore was created in 2006 by the three primary credit reporting bureaus, Equifax, Experian, and TransUnion. There are currently four versions of VantageScore, with the latest model released in 2017. 

The major difference between VantageScores and FICO scores is the score range. Earlier  VantageScore models have a score range of 501 to 990. Your VantageScore can often be significantly higher than your FICO score. VantageScores can vary, too, depending on which credit bureau or model is used, just like FICO scores. 

How to improve your credit score

What Is A Bad Credit Score? (And How To Improve Your Score) - How to improve your score

If your credit score isn’t where you want it to be, or it’s becoming a problem for your finances, you can improve it with some hard work and patience. Like anything else, you may have to make some sacrifices, but a good credit score can unlock so many things that it’s worth giving up some conveniences now to improve it.

Here are some things you can start doing right now to improve your credit score. 

Related: How To Improve Your Credit Score, Step By Step

Access your credit score and reports

To improve your credit, you first need to know where it stands now. You can do this by getting copies of your complete credit reports from all three bureaus — Experian, Equifax, and TransUnion. Your reports are available for free once a year at www.annualcreditreport.com or by calling (877) 322-8228. 

Errors aren’t common on credit reports, but they do occur from time to time. Check your reports for anything incorrect and if you find something, dispute it with the credit bureau. Even small errors can have an impact on your credit. 

You can buy your official FICO credit score through myFICO or use free credit score tracking apps Credit Karma or CreditWise to see your score. 

Pay your bills on time

Your payment history is a major player in determining your credit score. Your goal moving forward is to make all of your bill payments on time. Late payments are reported to the credit bureaus and will drop your score even further. A record that shows a history of on-time payments, though, will boost your score. Set alerts to remind you of upcoming bill payments or, even better, set up automatic payments for at least the minimum amount due to ensure that you don’t miss any payments. 

If you’re having a hard time paying your bills, reach out to creditors to see if they are willing to work with you. You might qualify for hardship or payment programs that will help you pay off any debts. 

Pay down your debt

To repair your credit, you also want to lower your credit utilization ratio. You do that by paying off your debt, including revolving credit accounts, like credit cards or lines of credit. Every little bit helps. Make at least minimum payments, but pay extra if you have additional funds available. This will lower the amount of outstanding debt compared to the total credit available to you. 

Apply for a secured credit card

Secured credit cards are designed for people with bad credit or no credit. You can qualify for a secured credit card through a security deposit instead of a hard credit inquiry. Your security deposit essentially becomes your credit limit. As you make small purchases on your card and pay the balance off on time and in full, those payments are reported to the credit bureaus. 

If you go this route, try to keep a low balance and never carry it over month-to-month. Secured credit cards often come with high APRs, so you could end up paying expensive interest charges if you don’t pay off the entire balance each month. Some credit card issuers will check your credit periodically and switch you to an unsecured card if your credit has improved.

Apply for a credit-builder loan

Another option to boost your score is to apply for a credit-builder loan. Similar to secured credit cards, these are personal loans for people with bad credit. Credit-builder loans work differently than traditional loans, where you receive the loan amount upfront and then pay it back over time. With a credit-builder loan, you make fixed payments each month until the end of the loan term, and then you receive the loan amount. These loan payments are reported to the credit bureaus the same as any loan. 

Will you pay interest as you do with other loans? Yes, and you may also have to pay a fee to take out this kind of loan, but that’s the price you might have to pay to avoid another credit inquiry or to qualify for a loan. 

Become an authorized user

Have a close family member with good credit add you as an authorized user on their credit card. Although this strategy isn’t likely to cause a massive jump in your score, it could have some impact, especially for individuals with a shorter credit history. Make sure the card issuer reports authorized users to the credit bureaus or this won’t help you.  


Improving a bad credit score can not only save you money but can also open up opportunities in most areas of your life. Use the tips and tools listed above as a guide to understanding your credit score and what you can do to boost it over time.

Read more:

Related Tools

About the author

Kevin Payne
Total Articles: 3
Kevin Payne is a personal finance writer specializing in credit cards, banking, and student loans. He is a regular contributor to Forbes, The Ascent, Student Loan Planner, and FinanceBuzz. Kevin is the budget and family travel expert behind FamilyMoneyAdventure.com. He lives in Cleveland, Ohio with his wife and four kids. You can contact him on Linkedin, Instagram, Twitter, or Facebook.