Key takeaways

  • A FICO score below 670 or a VantageScore of less than 661 is considered a bad credit score.
  • If your score falls in the bad credit range, you will face less favorable outcomes with lenders (who will charge you higher interest rates), landlords (who could deny you housing) and maybe even prospective employers (who could reject you for a job).
  • You don't need to live with bad credit. You can improve your score in various ways, such as making on-time payments and becoming an authorized user on the credit card account of a friend or family member with good credit habits.

A bad credit score is a FICO score below 670, meaning it falls in the fair or poor credit ranges. Along the same lines, a bad score in the VantageScore model is one below 661, which would belong in the fair, poor or very poor credit ranges. Scores in these ranges are often referred to by lenders as “subprime,” and people with a bad credit score may find it difficult to gain access to credit with favorable terms.

Bad credit makes many common financial activities more difficult, whether you’re opening a new credit card or taking out a first mortgage. You might get stuck with lower credit limits and higher interest rates — and bad credit might even prevent you from getting that new job.

What is a bad credit score?

There are two widely used credit scores: FICO score and VantageScore. While both scoring models use a credit spectrum ranging from 300 to 850, their credit scoring ranges are somewhat different.

What is a bad FICO credit score?

In the FICO scoring model, used by the Fair Isaac Corporation, scores range from 300 to 850. This number represents the likelihood that a borrower will repay a loan. If your credit score lands between 300 and 579, it is considered poor and lenders may see you as a risk.

Here’s how the FICO credit scoring system ranks credit scores:

  • Poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very Good: 740-799
  • Exceptional: 800-850

In 2022, the average FICO credit score was 714 points, which is squarely in the good range. If you have bad credit (less than 670), your credit score is significantly below average, in either the poor or fair range.

What is a bad VantageScore credit score?

VantageScore is another credit scoring model that pulls data from consumer credit reports in order to record a credit score. In the VantageScore model, a score between 300 and 660 is considered a bad credit score, with scores below 500 deemed very poor.

The VantageScore model breaks down its credit score ranges as follows:

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

The average VantageScore credit score in August 2023 was 701 — well within Vantage’s good credit score range.

Factors that impact your credit score

Your credit score is based on the information in your credit report. Each of the three major credit bureaus (Equifax, Experian and TransUnion) builds a unique credit report based on the way you use the various credit accounts under your name.

Here are the five factors that make up your credit score, according to the FICO model:

  • Payment history (35 percent): Your track record and timeliness of payments on your credit accounts.
  • Credit utilization (30 percent): Your credit utilization ratio, or debt-to-credit ratio, is your current credit balance compared to the amount of credit available to you.
  • Credit history (15 percent): The length of your credit history — that is, how long you’ve successfully maintained open credit accounts.
  • Credit mix (10 percent): The mix of credit in your account. Lenders like to see that you can manage both revolving credit, like a credit card, and installment loans, like a car loan.
  • Credit applications (10 percent): How often you apply for new lines of credit.

VantageScore uses similar factors but weights them differently. Under the VantageScore model, credit utilization and account types — having a varied credit mix over time — are more important than payment history.

It’s possible to have a high credit score even if you are weak in one of the five factors. If you are relatively new to credit, for example, you might not have an extensive credit history — and you might only have one or two credit cards under your name, which means you don’t have much of a credit mix yet. However, if you make on-time payments, keep your balances low and avoid applying for too much credit at once, you can still build and maintain a good credit score.

The impact of a bad credit score

Here are some of the unfortunate ways a bad score can impact you.

  • Harder time getting credit approval: Lenders view borrowers with bad credit as a risk, which means they’re less likely to approve you for credit. Since banks and lending institutions typically have rigorous qualification standards for their products, getting approval for a loan or credit card can be difficult for anyone with a bad credit score.
  • Higher interest rates and more restrictive terms on loans and credit cards: Some lenders have more lenient guidelines and will approve a borrower with bad credit for credit products. However, they’ll likely offset their risk by attaching a higher interest rate to the loan or credit card — the higher your interest rate, the more you’ll pay in interest.
  • Higher insurance premiums: Most states allow home and auto insurance carriers to check your credit scores as part of their risk analysis. Your insurer may consider your bad credit score an indicator of higher risk overall and charge you a higher premium.
  • Tougher time renting an apartment: Many landlords run credit checks on potential tenants. The landlord won’t see your credit score, but your credit report allows them to review your payment history, collection accounts and other information. Ultimately, landlords are less likely to approve a lease for applicants with bad credit than they are for tenants with good credit.
  • Could restrict career opportunities: With your written permission, it is legal in most states for an employer to review your credit report and use the information when making hiring decisions. Although some states have laws that restrict using credit information in the hiring process, other states don’t offer such protections.
  • May have to make a deposit for utilities: Utility companies can and do perform background checks on those who seek their services. If your credit history is poor, you may be required to pay a security deposit in order to establish utility services.

All of these effects can weigh on your mind. According to a survey by FICO, 85 percent of Americans find that when their credit score is healthy, they feel more secure in general.

If you’re concerned your credit may be having a negative impact on your life, rest assured that you can take proactive steps to raise your credit score.

How to improve a bad credit score

There are many ways to improve your credit score. Ultimately, it comes down to taking strategic action and consistently making strong financial decisions. Here are four steps you can take to improve your credit profile.

  • Check your credit reports: Start by getting a free credit report from each of the three major credit bureaus at Dispute any errors and identify the negative information bringing down your score so you know where to focus your credit repair efforts.
  • Avoid late payments: Since payment history makes up 35 percent of your FICO credit score, paying your bills on time is one of the best ways to build and maintain strong credit. Consider setting up automatic payments on your accounts to prevent late payments.
  • Lower your credit utilization ratio: Your credit utilization ratio accounts for 30 percent of your FICO score. A common rule of thumb is to keep your balances below 30 percent of your credit limit, while the highest credit score achievers use less than 10 percent of their available credit.
  • Become an authorized user: If your credit history is thin or you just want to improve your payment history, consider asking a friend or relative to add you as an authorized user on their credit card account. Assure the person helping you that you don’t even have to use the card or even know their account number. This strategy can be beneficial if the person you ask has an account with a high credit limit, low credit utilization and a strong history of timely payments.

The bottom line

A bad credit score is a FICO credit score below 670 and a VantageScore lower than 661. If your credit isn’t where you would like it to be, remember that a bad credit score doesn’t have to weigh you down. Fortunately, you can take simple steps to improve your credit, and you might even see results quickly. It’s worth the effort because good credit can lead to more opportunities and financial benefits.