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What Is a Fair Credit Score, and Is Fair Good Enough?

A decent credit score is the key to many financial opportunities, but is a fair credit score high enough to help you access them?

January 24, 2022

You’ve probably heard you should aim for a decent credit score — that’s any score that falls in the “good,” “very good” or “exceptional” category. But what is a fair credit score, and how does it fit into the picture?

Let’s look at:

  • What a fair credit score is, 

  • The mechanisms behind credit scores

  • Why credit scores matter

  • Strategies to improve your credit score

What is a fair credit score?

Your credit score is a number that represents the health of your credit history and your reliability as a borrower.

Leading credit scoring agencies FICO and VantageScore measure credit scores using a scale between 300 and 850. 

The FICO Score thresholds for each category are as follows:

  • Poor credit score:  Less than 580

  • Fair credit score: 580 to 669

  • Good credit score: 670 to 739

  • Very good credit score: 740 to 799

  • Exceptional credit score: 800+ 

VantageScore has a similar system.

Based on the scale, a fair credit score is between 580 and 669. But what does this mean, and what determines your score?

How credit scoring works

To understand what a fair credit score means, you’ll need knowledge of the mechanisms behind the calculations. 

The three credit bureaus — Experian, TransUnion and Equifax — collect data about borrowers like you and compile credit reports. Then, credit scoring agencies, like FICO, use these reports to determine your credit score.

There will always be some variation between scores since each agency uses different credit scoring models. But they use similar factors, so we’ll continue to focus on FICO for the sake of simplicity (and since it’s the most widely used credit score). 

A FICO credit score is determined by:

  • Payment history: Whether you’ve previously made your payments on time

  • Amounts owed: How much of your available credit you’re using

  • Length of credit history: How long your credit accounts have been open

  • Credit mix: How many different types of credit you have

  • New credit: How often you open new credit accounts

Is a fair credit score good?

We’ve already established that a fair credit score is between 580 and 669 using the FICO scoring model. But how far will that get you with lenders?

Securing a fair credit score can be a great initial milestone, especially if you’re coming from a very bad credit score. However, most lenders will still consider you a subprime borrower if you’re at the lower end of this range. 

For context, the average credit score in the U.S. was 711 in 2020, which falls within the “good” range. You’ll be viewed more favorably by lenders if your score is “good,” “very good” or “exceptional” — with the best lending opportunities usually going to those with a score of 760 or higher.

Why do credit scores matter?

Now that we’ve established what a fair credit score is and how it’s calculated, there’s an even more important question to answer. Why should you care in the first place? Here are three key reasons.

Increased credit approval odds

Lenders use credit scores to make their lending decisions and determine if a borrower is reliable and creditworthy. 

If you have a fair credit score, you can expect to encounter limitations when accessing credit like personal loans, student loans and credit cards. You might be able to get some form of loan, but boosting your score up to the “good” range will provide you with more opportunities.

For instance, the best credit cards — those with perks like cashback and points — tend to ask for higher credit scores. However, there are different credit score requirements depending on the lender, and some specifically target their products at those with a low or limited credit history.

Better credit card and loan terms

But this isn’t just a case of being accepted versus rejected. A better credit score means a higher chance of receiving good credit card and loan terms. The more likely it seems that a borrower will make on-time payments, the more likely a lender will be to offer lower interest rates, which results in lower monthly payments.

Depending on the type of loan, there may also be other perks. For instance, in the case of mortgages, you might get to put down a lower down payment.

More opportunities in life

It’s tempting to dismiss credit scores as nothing other than abstract financial metrics, but they’re linked to many vital aspects of life, going beyond auto loans and mortgages.

For instance, landlords and even employers may sometimes review your credit score or history as part of a background check. Few things are more important than a job or a place to live, so credit scores are worth taking seriously.

Fortunately, no matter what point you’re starting from, it’s possible to improve.

How to get a better credit score

Now that you know why improving your credit score matters, you’ll probably want to know how to get there. Whether you’re aiming to go from a fair to a good, very good or even exceptional score, the same advice follows — it’s just that you have to be more diligent on the factors mentioned below if you want a higher score. 

Avoid missed or late payments

One of the best things you can do for your credit score is avoiding late payments (or missing your payments completely). After all, payment history is the largest factor in determining your credit score.

If you’re struggling to stay on top of when your due dates are, consider enabling automatic payments from your bank account, so you no longer have to think about it.

Avoid closing credit accounts

Another credit score factor is the length of your credit history — the longer, the better. 

It might not seem like there’s anything much you can do to improve your credit history, but there’s one thing: Keep accounts open when possible (especially older accounts). You risk harming your average credit history length whenever you close a credit account.

Work on your credit utilization ratio

Your credit utilization ratio is the percentage of credit available to you that is actually in use. The lower the ratio is, the more creditworthy you seem to lenders because it shows you’re not overly reliant on credit and therefore likely to pay back what you borrow. In general, 30% is a good ratio to aim for.

If you’re struggling to keep your ratio low, consider paying your credit card early. This way, the ending credit card balance reported to credit bureaus will be lower, which will lower your credit utilization ratio.

Avoid hard inquiries

There are two types of credit inquiries

  • Soft inquiries, which don’t hurt your credit score

  • Hard inquiries, which can temporarily impact your credit score 

Applying for new credit involves a hard pull — so avoid these unless you think you stand a good chance of acceptance.

Fortunately, most credit card providers offer soft inquiries before a hard inquiry, so you can determine if you’re likely to be accepted before taking the risk.

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Go further than fair

Knowing what a fair credit score is might be a good place to start, but there’s no reason to stop there. With some tinkering and patience, a good credit score could be within reach — or maybe even an exceptional score.

Two of the essential factors in determining your credit score are ensuring you make your payments on time each month and gradually paying off your debt.

If you’re paying off credit card debt but struggling to make on-time payments, Tally† can help. Tally is a credit card repayment app that manages all your payments in one place. It can help you pay down debt more efficiently with a lower-interest line of credit, meaning fewer late payments on your history and a faster path towards debt freedom. 

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.