What Is Fair Credit? A Closer Look at the Credit Score Category and How to Improve It

I will remember certain numbers my entire life. They include my undergraduate grade point average, my draft lottery number (yes, there used to be a draft), and my first credit score — 649. That score was good enough to put me in the fair category, and I’ve been improving it ever since. 

According to FICO, the leading credit scoring model, fair credit means you have a score between 580 and 669. It’s neither terrible nor terrific, and it occupies the middle ground of the scoring range between good and poor credit. 

Fair credit can qualify you for second-tier credit cards and higher-priced loans. But with sound financial habits, you can raise your score to good or excellent, a journey that will benefit you over your lifetime.

Fortunately, 649 was also my lowest credit score, meaning I started with fair credit and never looked back. Read on to learn more about fair credit and how you can improve it like I did.

The world of credit scores — those three-digit numbers from major scoring systems like FICO and VantageScore — can make quite a difference in your financial life. Let’s dive into what credit scores are, how credit bureaus come up with them, and why they matter so much in decisions about loans, credit cards, and even some of life’s big-ticket expenses.

What Credit Scores Represent

Many folks view their credit scores as sort of a financial report card. Just as your school grades summarize how well you did in class, your credit scores describe your experience managing your finances. They are a quick way for creditors to know how reliably you’ve repaid the money you’ve borrowed and the likelihood of future repayments.

Your score will be high if you’ve always paid your bills on time and controlled your debt. Failure to do so is going to bring down your score.

It’s not just a matter of what you’ve done but how long you’ve been doing it. Lenders examine your credit history to determine trends in managing your money. 

Have you been responsible with credit for decades, or are you just starting to build your credit profile? Your credit history, combined with other factors, shapes the all-important credit score creditors use to decide whether to trust you with their money.

Credit Score Calculations 

So, where do credit scores come from? They are a direct result of your credit history. Credit bureaus analyze your credit history using sophisticated algorithms from FICO and VantageScore to calculate your scores. 

It’s a massive plus if you consistently pay your bills on time. But miss a payment or two, and you’ll watch your score drop like a stone.

Your credit utilization ratio is another major factor affecting your score. It’s standard jargon for how much of your credit card limit you’re using. If you max out your credit cards, you’ll appear as a riskier borrower in the eyes of lenders.

A high credit utilization ratio (i.e., greater than 30%) will hurt your score. Therefore, keeping card balances low relative to their credit limits is an intelligent way to boost your score.

Your length of credit history, i.e., how long you’ve been borrowing money, also plays a significant role. More data on your financial habits is available if you have been using credit for longer.

A long, well-managed credit history usually translates into a higher score. That’s why it’s essential to start building your history as soon as possible (age 18 in most states).

Your score also reflects the types of credit you use and your recent credit applications. A mix of credit types, such as credit cards, mortgages, store cards, and auto loans, indicates that you are adept at managing varied debt. 

While applying for new credit can sometimes be necessary, doing so too often within a short period (i.e., six months) can signal financial distress and could reduce your score by a few points due to the hard inquiry the issuer will perform.

The Role of Credit Scores in Lending and Credit Decisions 

Let’s look at how credit scores affect your ability to borrow money. If you apply for a loan or a credit card, the lender will use your credit score as a snapshot to determine your credit risk (i.e., the risk that you won’t repay your debt).

As you would expect, a high score tells creditors you will likely pay back your debt. High scores give creditors the warm and fuzzies when you apply for a loan or credit card. They will likely court your business with low interest rates and fees, excellent terms, and great perks.

Things start to get a little tricky when your score is lower. You can still be approved for the credit card, but under worse terms. You’ll likely face higher interest rates or less desirable perks. Why? It’s because you’re riskier to the creditor. 

High credit scores give creditors confidence when you apply for a loan or credit card. They will likely court your business with low interest rates and fees, excellent terms, and great perks.

That means you’ll pay more interest than someone with a higher score. A troubled credit history can also hamper your lifestyle, as insurance companies, employers, landlords, and even dating partners may use it to make decisions. 

Unfair? Maybe not — from a creditor’s point of view, your credit score and history show how well you deal with responsibility. That motivated me when I got my first score to do the things to whip my score into shape. Your score is a massive part of your financial toolkit and can open or close doors in many areas of your life.

Now, let’s analyze what it means to have fair credit and how it stacks up against good credit scores. Understanding where you fall within the credit score rating range can open your eyes regarding the quality of the financial products available.

FICO and VantageScore Ranges 

Most FICO and VantageScore versions use the same overall scoring range — 300 to 850 — but differ in drawing the lines separating score categories.

As you can see, fair credit means a score of 580 to 669 on the FICO scale. Credit newbies often start off with fair credit. If you are a seasoned borrower, a score in this range indicates that you may have some blemishes on your credit history, such as late payments or high credit card balances. 

Accordingly, creditors may consider you somewhat risky, but less dangerous than someone with poor credit. 

Fair credit ranges from 601 to 660 on the VantageScore scale. VantageScore is a bit more lenient in certain areas, so even if your score hovers around the lower end of this range, you may have better access to credit than with a FICO score in the same bracket.

While FICO is the leading system, creditors widely use both scoring models, so your experience can vary depending on which score lenders check.

Fair credit in each case signifies that you have encountered some financial challenges but may be working your way back to better credit. It’s an in-between territory: Many consumers land here after recovering from some financial setbacks or when starting to build a credit history. 

The good news is that it’s possible to transition from fair to good credit with a bit of work.

Fair Credit vs. Good Credit

Now, let’s compare fair and good credit so you understand what’s on the line when working to improve your score. The disparities in these two categories potentially make a difference regarding the interest you pay on a loan and/or the types of credit cards you can get. Check out how they stack up:

As you can tell, going from fair to good credit opens up a vista of financial opportunities, from paying less loan interest to qualifying for credit cards with higher credit limits, better rewards, lower costs, and many more benefits.

It’s clear that the work consumers must do to increase their scores can save them a lot of money and provide considerably more financial freedom.

A fair credit score means you are floating between poor and good credit. It is definitely better than a poor score, but it needs to be better to get the best financial perks. 

It can seem a little scary when you consider how many aspects of your life hinge on your credit score. Whether it’s the interest rates you pay on debt, renting a place to live, or even landing a job, your credit score is like an invisible hand pushing you toward your destiny.

Let’s take a closer look at just how fair credit can affect your life and lifestyle.

Affects Interest and Terms of Loans and Credit Cards

You are a moderate risk to creditors when you have a fair score. You’re neither the worst-case nor best-case scenario.

Because of your in-the-middle status, interest rates on loans and credit cards run higher than they would if you carried good or excellent credit. In effect, you must pay a “just in case” fee — creditors must charge more because you might fail to make timely payments or default altogether.

Take credit cards, for example. You can get a decent card with just fair credit. However, the card’s APR will probably be several percentage points higher than it would be if you had good credit.

The good news is that the purchase APR only affects you if you tend to carry an unpaid balance from month to month. Your APR doesn’t matter if you pay for your purchases by the due date, thanks to the interest-free grace period.

Cash advances are another story — they charge interest on Day One, and cards for fair credit usually have very high cash advance APRs. 

However, suppose you plan to finance purchases over multiple months. In that case, a high APR will consume a significant chunk of your payments, leaving less money to repay the principal. Spending more and taking longer to repay is not a happy situation. 

Even worse is spending most of your card’s limit and then finding it impossible to repay the balance. That could lead to a debt spiral in which you lose control of your finances, often with dire consequences. That’s why keeping a close eye on your budget is critical. 

Loans work in much the same way. Apply for a mortgage, auto, or personal loan with a fair credit score; you will be offered less desirable terms even if the loan is approved. The same is true for private student loans.

For long-term debt, higher interest can add thousands of dollars to the total cost of the loan. That is why improving your credit score can really benefit your financial bottom line.

Housing and Employment Prospects

Your credit score shows up in pretty surprising ways — places where you would not necessarily think it would apply, including housing and employment. You may think of fair credit as just a number, but it can influence where you live and work. 

Landlords, mortgage lenders, and even employers commonly run credit checks before deciding to accept your application. Yes, laws are in place designed to protect you from discrimination, but real life gets a little more complicated.

Housing

Landlords frequently pull your credit report while processing your application. They may be checking for indicators that show you’ll be a perfect tenant — one who will pay the rent on time and not give them any financial headaches. With just fair credit, you may have to pay a larger security deposit or even face rejection for the apartment you want, especially in a highly competitive market. 

The Fair Housing Act was passed to protect against discrimination based on race, color, religion, sex, familial status, or national origin, but it doesn’t include credit scores. That gap allows landlords to use your credit score as a deciding factor, disproportionately affecting those with fair or poor credit ratings.

There’s more riding on a home mortgage, too. With a fair credit score, you might have a more challenging time getting approved or good terms on the loan.

The Equal Credit Opportunity Act protects you from being discriminated against by a lender because of race, color, religion, national origin, sex, marital status, age, or because you receive public assistance.

Even with this law, lenders can use your credit score to determine how high an interest rate you’ll pay or the loan size you can obtain. In other words, while you are protected against many types of discrimination, your fair credit score may end up costing you thousands of dollars in additional interest.

Then there is the effect on jobs. Many employers, particularly those involved in finance, the government, and private security, will perform a pre-employment credit check. To this kind of employer, your credit history reflects your sense of responsibility and whether you are a person of character. 

The Fair Credit Reporting Act (FCRA) requires an employer to get your consent before pulling your credit report and to notify you if lousy credit was the reason for job denial.

However, FCRA also allows an employer to use your credit history in hiring decisions. The problem is that, given two similar job candidates, an employer may understandably favor the one with better credit, even if both are equally reliable and hardworking. 

People who suffer from discrimination may also have to overcome financial challenges caused by that very discrimination.

The problem with such laws is that, while they avoid discrimination, they overlook the impact of credit scores on housing and job allocation. People with fair credit scores may have to pay more for housing and miss out on jobs even if they can fully meet their obligations.

In other words, fair credit is more than just a number that impacts borrowing power. It also influences how easily you can obtain essential things, like a job or home. The truth is that people who suffer from discrimination often have to overcome financial challenges caused by that very discrimination. It’s hard to build solid finances if folks secretly won’t hire you because of your race, gender, or religion, notwithstanding laws to prevent discrimination.

Even laws designed to protect against discrimination could still leave those with fair credit disadvantaged. It’s a reminder of how credit scores impact other aspects of our lives (and vice versa) and why working toward better credit is essential.

Building your credit score takes time. Below are some strategies to move from fair to good or even exceptional credit. The main arguments favoring working on your credit habits are to obtain better financial products, lower interest rates, and economic freedom. Let’s start with the most critical factor: paying your bills on time.

Pay Your Bills on Time 

Nothing tips the credit scales as much as paying your accounts on time. In fact, the Payment History category is worth 35% of your FICO score. It is the most critical factor in determining your creditworthiness. Think of making on-time payments as slapping a gold star on your credit report with every payment you make.

On the other hand, being late with or missing a payment may have the most significant adverse effect on your score, especially once payments cross the 30-day-late threshold.

It isn’t just credit cards and mortgages that play into your payment history. The FICO system includes various account types, including personal loans, store credit cards, automobile loans, installment loans, and student loans in your payment history. Even utility bills, rental payments, and phone bills can crop up if reported to the credit bureaus. 

Keeping track of all those due dates is vital to raising your credit score. FICO evaluates the number of past-due items on file, the severity of those delinquencies (i.e., how long the payments were overdue), the amount still owed on delinquent accounts, and the number of accounts showing no late fees.

The more consistent you are in paying your bills on time, the better your payment history looks to lenders — an automatic boost to your credit score.

How can you improve your payment history if it’s only fair? One of the most practical steps is to set up automatic bill payments wherever possible. This avoids those situations when you forget a payment is due. 

One of the most overlooked ways to improve your credit score is to regularly check your credit reports for mistakes.

In cases where autopay is impossible, set up reminders on your calendar and/or bank app to notify you a few days before each bill is due. Consider personal financial software such as Quicken, which can automatically send payments and remind you of upcoming bills.

If you miss a payment, pay your past-due accounts immediately. The sooner you do so, the more damage you can avoid. If you cannot afford some payments due to financial problems, contact your creditors to discuss options for payment plans or hardship programs. They may be willing to make arrangements with you since it’s in their best interests to help you pay what you owe.

Monitor Your Credit Utilization

Another effective way to improve your credit score is by monitoring your credit utilization. Your credit utilization ratio denotes the amount of available credit card credit you are currently using. It belongs to the Amounts Owed FICO category, which makes up 30% of your total score.

Generally, you should keep your credit utilization under 30% — the lower, the better. Balancing your spending with your available credit can help you stay within this range and improve your credit score. 

To reduce your credit utilization, spread it across multiple cards rather than max it out on one. This will leave you using a smaller percentage of each card’s limit, which can positively affect your score. 

Another tip is to pay down your balances as much as possible before your statement closes each month. The earlier you can do so, the less will be reported to the credit bureaus, promoting low utilization.

Remember that credit utilization is only one piece of the Amounts Owed category. It also considers the total balance across all your accounts, how many accounts have balances, what percentage of loan balances are of the original loan amounts, and how much you still owe on installment loans. 

These pieces provide a good sense of how well you manage debt. By reducing your credit utilization and keeping your overall debt in check, you will be well on your way to a healthy credit score.

Review and Correct Credit Report Errors

One of the most overlooked ways to improve your credit score is to regularly check your credit reports for mistakes. Errors happen constantly, and sometimes a slight inaccuracy may draw down your score. 

Common mistakes include accounts you don’t recognize, hard inquiries you didn’t authorize, and transactions you didn’t make. These errors could paint you as a riskier borrower than you are, so it’s worth detecting and correcting them quickly. More importantly, they may hint at identity theft, a more severe problem.

You can request a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion). You can also request copies from all three bureaus for free as often as once a week from AnnualCreditReport.com. When reviewing your reports, look for errors and unrecognizable information within them. If something does not add up, it may be a mistake — or worse, identity theft. 

If you find an error, don’t panic — you can dispute it on your own or with the help of a credit repair agency. If you wish to dispute the error, contact the credit bureau that issued your report. It would help if you produced whatever supporting documents you have with your claim. The law gives the bureaus 30 days to investigate and correct inaccuracies. 

Suppose you aren’t comfortable doing it yourself. In that case, credit repair agencies can assist you in the process, though beware — in some instances, they charge hefty fees for services you can mostly do for free. Acting quickly is essential, as correcting these errors can significantly boost your credit score.

Fair credit is the middle ground where you are not entirely out of the woods yet not in deep trouble. It occupies a place between good and bad credit, reflecting a mix of responsible habits and some financial missteps. 

Knowing how to manage your fair credit — making on-time payments, maintaining low credit utilization, and correcting mistakes on your credit report — can make a big difference. By acting responsibly in these areas, you can move up to good credit, get better interest rates, and open the door to more financial opportunities.