What Is a Bad Credit Score?

5 Min Read | Last updated: September 13, 2024

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“Bad” credit scores are more accurately described as below average, but credit scores aren’t permanent. There are plenty of ways to turn a score from bad to good.

At-A-Glance

A credit score is only “bad” if it keeps you from qualifying for the loan or interest rate you want.
People with credit scores labeled “subprime” — meaning, below average — likely won’t get good interest rates or may not be able to borrow at all.
Credit scores aren’t permanent. With discipline and time, anyone may be able to improve their scores.

“Bad,” like beauty, is in the eye of the beholder — and it isn’t even a word that credit reporting agencies or lenders use. So, when you ask “What is a bad credit score?”, the most accurate answer is any score that keeps you from qualifying for the credit card, loan, or interest rate that you’re seeking.

Let’s explore what that means in practice, and what people with so-called bad scores can do to improve them.

‘Bad’ Credit Scores Are Officially Subprime, Fair, or Very Poor

Although “bad” is not one of them, there are certain words lenders and reporting agencies generally apply to specific credit score ranges, each of which has different implications for your ability to use credit to borrow money. There are two major credit scoring models, FICO and VantageScore, and they both report scores from 300 to 850. Though they break down their ranges slightly differently, they’re closely aligned. Let’s focus on FICO, which is the older model and more widely used in lending decisions.¹ The FICO Score ranges are the following:

Exceptional: 800-850
Very Good: 740-799
Good: 670-739
Fair: 580-669
Poor: <580

Americans’ average FICO credit score was 715 in 2023 and falls in the "Good" range or the "prime" range, according to the Consumer Financial Protection Bureau.^2,3 When you hear “subprime” used to describe credit scores, it may mean below average. Lenders usually consider any score below the good range as subprime and might anticipate that people with subprime scores may struggle to repay what they borrow.⁴

So, you may consider it fair to call a subprime credit score bad. And according to the Experian credit reporting company, approximately 28% of people have subprime FICO scores (falling below 670), which means they generally may not receive favorable interest rates and may not be able to borrow at all.³

A ‘Bad’ Credit Score Limits Your Options

A subprime credit score can mean different things, depending on your personal situation and financial goals. If you’re retired, own your home outright, and don’t need to borrow money, even a poor score may not make a difference to you. But if you’re trying to buy a home or need to borrow money to replace a broken refrigerator, the picture may be quite different. Broadly speaking, bad credit scores may result in the following:⁵

Paying higher interest: Lenders may reserve favorable interest rates for customers with the highest credit scores because those scores tend to predict who is most likely to repay what they borrow.⁶ That means lenders will charge subprime borrowers higher interest, for example for mortgages.⁷ If you pay off the balance on your credit card each month, higher interest rates may not matter much. But over the life of an auto loan or mortgage, a higher interest rate might cost you thousands of dollars and mean a higher monthly payment.
Challenges to getting a mortgage: Low credit scores may hurt approval chances. And if you do qualify, it may cost you more in interest.
Other difficulties: It may be harder to get approved for an apartment lease, utility service, or mobile phone contract, for example. Or you may qualify only if you make a deposit. You may also have to pay higher premiums for insurance.
Job-seeking hurdles: It may be tougher to get that dream job, since many employers check credit reports as part of job-candidate background checks.

If your current credit score is subprime and the consequences sound bleak, there are still good reasons not to be discouraged. Remember, credit scores aren’t destiny. You can take action to improve your credit score.

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Tips for Improving Your Credit Score

Improving your credit score doesn’t happen overnight. Negative marks, like late payments, can stay on your credit report for as long as seven years.⁸ But with discipline and diligence, you might improve the score over time. The following tips could help:

Pay bills on time. More than a third of your credit score is shaped by your payment history, so on-time payments can make a big difference. If your memory isn’t a strong suit, setting up automatic payments is one way to ensure you keep current.
Keep balances low. Credit utilization — how much of your available credit you use — is the second most important factor in shaping your credit score. Keep your balances below 30% of your total credit limit, but the lower the better.⁹
Build good history. Think carefully before closing credit card accounts. Lenders value credit history. Assuming you keep your account in good standing, the longer you have it, the more it helps your score.
Mix it up. Lenders want to see that you can effectively manage different kinds of credit — credit cards, personal loans, auto loans, and mortgages.
Apply for credit carefully. Every time a creditor pulls your report for the purposes of making a lending decision, it’s called a hard inquiry. And it dings your score.
Explore different credit options. If you’re not able to qualify for a standard credit card or get a personal loan from your bank, you’re not out of options. There are other financial products that might help anyone build credit, and some are designed specifically to help people with poor credit or no credit. One option is to become an authorized user/additional card member on someone else’s account. You’ll both get credit for a positive credit history. Of course, you’ll also both experience credit dings if there are late payments or excessive spending on the account.¹⁰
Know where you stand. Review your credit report regularly. It’s easier to develop an improvement plan if you have a clear understanding of what’s helping or hurting your score. And a regular review may help you spot errors or signs of fraud on your report, either of which could potentially keep you from a good or excellent score.

The Takeaway

A bad credit score is one that keeps you from qualifying for the loan or interest rate you want. For most people, a score of 669 or less — which lenders regard as subprime — qualifies as a “bad” score. But credit scores are not permanent, and taking strategic action might help you improve your score over time.

¹ “The history of credit score algorithms and how they became the lender standard,” Marketplace

² “Borrower Risk Profiles,” Consumer Financial Protection Bureau

³ “What Is the Average Credit Score in the US,” Experian

⁴ “What Does Subprime Mean?,” Experian

⁵ “How to “Fix” a Bad Credit Score,” Experian

⁶ “How Does Your Credit Score Affect Your Interest Rate?,” Experian

⁷ “The Pros and Cons of Subprime Mortgages,” Experian

⁸ “How Long Does Information Stay on my Equifax Credit Report,” Equifax

⁹ “How are FICO Scores Calculated?,” FICO

¹⁰ “What Is An Authorized User on a Credit Card?,” Equifax

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Allan Halcrow is a freelance writer concentrating in business, human resources, and diversity and inclusion. He is also the author of four books on management.

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.

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