So, you just found out that you have a 650 credit score. Now what? What does a credit score of 650 mean, and what do you need to know now? When it comes to credit scores, it can feel that the numbers and their meanings are a foreign language, or an encrypted code. It can be difficult to decipher what a score means, how it affects your life and ability to purchase, and how to go about raising the score. If you are feeling frustrated, confused or overwhelmed trying to understand what your credit score means and how it impacts your life then you have come to the right place!
I once found myself in a similar place. My 650 credit score confused me. “Is 650 a good credit score? What can I do to raise it? Can I buy a home? Can I buy a car with a score of 650?” These were some of the questions that plagued me late at night when I worried about finances and the future. Maybe you have come to a similar place. I have good news for you: I have done the research, I have learned the lessons, and now I will share the information I have learned with you. Hopefully this website will save you some time and energy trying to research what you need to know and prevent you from sitting up late at night worrying, as I did. Allow me to walk you through what your credit score of 650 means.
What it means to have a Credit Score of 650
A credit score is a number that indicates to a lender your worthiness of borrowing money for a car, home or other lines of credit. It is a 3 digit number that is determined by looking at your credit history. The following chart shows what is taken into account when calculating your credit score.
The credit score range can be anywhere from 350-850; anything below 350 means that you have no credit history. So where does your 650 credit score fall in the scheme of things? According to credit.com to have a rating of excellent credit your score would fall between 750 – 850. This is difficult to achieve, but the benefits are worth the work. Good credit is considered to be a score of 700-749. A 650 credit score falls on the low end of the fair range. 650-699 is a fair credit score, while 350-649 is the poor range.
The National Average
It may be encouraging to see where your 650 credit score lands you on the national average. According to governing.com the current national average is a credit score of 687. This means that your credit score of 650 sets you pretty close to the national average. Southern states have a lower score average, whereas northern states typically fall above the US national average.
The Good News
Everyone wants to hear the good news first right? Well here it is: with a 650 credit score you can still get loans! You can read more about the different types of loans and credit you can receive with a score of 650 on the pages included right here on my website. I’ll answer questions like, what is a good credit score, or what is a good credit score to buy a house? I can walk you through all of the types of loans you may be curious about, and how having a score in the 650 range may affect these loans.
More Good News
You can change your credit score! Your credit score is constantly changing, and could change completely in as little as 3 months depending on what you are doing with your financial activity. There is hope for anyone in the area of credit scores. And employing wise financial strategies can assist in helping you improve your score.
The Bad News
Having a 650 credit score means that banks view you as a little more of risk when loaning money for various lines of credit. They may still loan you the money, but you may end up paying higher interest rates for these loans. What does that mean? Well, an interest rate is the amount of money that the person borrowing the money is paying the person who is lending the money. Banks, mortgage loaners and, lines of credit are basically like borrowing money from someone. This someone needs to get something for giving you their money for a period of time. Typically they charge a percentage of the money borrowed and multiply that by the length of time it takes to pay it back. Interest rates work both ways. Let’s say you put 500 in a savings account and leave it there for a year with an interest rate of 10%. At the end of the year your balance will be $550. The reason is that the bank doesn’t just have your money sit there, it’s sort of like they are borrowing money from you, they use it to loan out to other people for things like mortgages or other lines of credit. They are willing to pay you to leave their money with them, using this as their cash flow system to lend to other people. The banks then charge people who borrow money from them a certain percentage and are able to make up the amount they are paying you to leave you money in a saving account, and more. Interest rates are determined by the lender, and they can charge people more interest if they think there is a greater risk in lending to that person. A 650 credit score means that you fall into a category that is viewed as a little higher risk than someone with a credit score of 700 or more. People with higher credit scores have proven that they are consistent in paying back what they have borrowed in a timely manner.
Improving Your 650 Credit Score
So what can you do to improve your credit score? I asked myself the same question when I was haunted by my persistent 650. First, let me pat you on the back for taking the right steps, you are wise in seeking out information, and you are on the right path! Second, take a deep breath! It’s not the end of the world. With some hard work and persistence I raised my score. Below are some tips to rebuilding credit. In the meantime, use this site to inform yourself about the options you currently have for mortgages, auto loans, and credit cards with a credit score of 650.
Steps you can take to improve your credit score:
- Know what’s in your credit report. If you don’t know what’s in there, you won’t know where you went wrong.
- Fix any errors: Sometimes credit can be affected by something as small as a misspelling of a name or an incorrect address. If you find an error, credit reporting agencies are required to fix it at no charge.
- Determine what went wrong. Whether you missed payments or filed for bankruptcy the credit report will explain this if you read it carefully. Seeing this in black and white should help you see what steps you need to take personally.
- Start growing your score by paying on time, and reducing credit debt. Build a small amount of savings for emergencies and then begin paying off debt beginning with the smallest, while continuing to make minimum payments on the rest on time.
- Continue to inform yourself using this website to help you utilize your 650 credit score.
Common Credit Questions
You’ve asked, we’ve answered. Here are your most common credit questions, explained.
Good credit is considered to be a score of 700-749. A 650 credit score falls on the low end of the fair range. 650-699 is a fair credit score, while 350-649 is the poor range.
Quite simply, a credit score is a number assigned to an individual that indicates to lenders their creditworthiness, or capacity to repay a loan. This score includes several factors, including repayment history, total debt, what types of credit you have, the length of those accounts, and if you have taken out any new credit recently.
Your credit score is calculated based upon both positive and negative factors of your finances. According to myFICO, your credit score consists of:
- 35% payment history
- 30% amounts owed
- 15% length of credit history
- 10% credit mix
- 10% new credit
Both the FICO Score and the VantageScore are proprietary models used to determine a consumer’s creditworthiness. FICO was developed over 25 years ago by the Fair Isaac Corporation (FICO) and is the most widely used metric. VantageScore was launched in 2006 as a joint development by the three major credit bureaus: Equifax, Experian and TransUnion – and is the FICO score’s largest competitor.
Your credit score – FICO and VantageScore – all aim to accomplish the same thing; to determine how likely you are to repay a loan.