Credit Scores: How Low Can You Go?
, by Rob Kaufman
Many people are curious as to what the lowest possible credit score is. They also wonder: if my score is in the range of the lowest score, should I kiss any kind of loan or credit approval goodbye?
For now, we're going to focus on FICO® Scores because these are the scores used by 90% of top lenders. The lowest FICO Score you can have is 300 and you typically need more than double that number to get approved for some types of loans.
For example, in the fall of 2018, 1% of borrowers approved for a conventional mortgage had a FICO Score below 600. As far as auto loans go, borrowers with FICO Scores below 500 represented less than 4% of new loans. What these numbers say is that the lower your score, the lower your chances of getting the kind of loan you want. And if you do get a loan, you'll most likely pay interest rates higher than most.
What's a low credit score range?
"Base" FICO Scores (FICO Score 8) range from 300-850, while industry-specific (auto, mortgage and credit card) FICO Scores range from 250-900.
For a better idea of credit score ranges and what they represent, here is a summarized analysis of FICO Score 8 credit scores:
579 and lower :
Score : Poor. Consumers who fall within this range are considered a poor credit risk and may be rejected. Many who fall within this range must often put down a deposit or pay a fee to obtain a credit card or home utility services.
Risk : High. About 61% of consumers with a credit score of 579 and lower are likely to become delinquent.
580 to 669 :
Score : Fair. Since this score range is below the national average, these borrowers will have a more difficult time getting credit and, if they are approved, will more likely than not end up paying a higher interest rate than those with better credit.
Risk : Medium-High. About 28% of consumers with a credit score of 580-669 are likely to become delinquent.
670 to 739 :
Score : Good. A "median" range, this score identifies a borrower as "acceptable" which means he or she might not get as low an interest rate as those in a higher credit score range.
Risk : Medium. About 8% of consumers with a credit score of 670-739 are likely to become delinquent.
740 to 799 :
Score : Very Good. This score range is also above the national average and borrowers in this range are at a great advantage in both the likelihood of getting credit approval and being offered lower interest rates.
Risk : Low. About 2% of consumers with a credit score of 740-799 are likely to become delinquent.
Score : Exceptional. This credit score range is way above the national average and borrowers within this range will most likely not have a problem getting credit.
Risk : Low. About 1% of consumers with a credit score of 800+ are likely to become delinquent.
So back to the question: Does a FICO Score of 300 mean you can't get credit?
It all depends on the individual lenders and insurance companies and what they consider an acceptable level of risk. They may take someone with a low score, approve them for credit but charge a very high-interest rate on unpaid balances. They might also approve someone with a low score but only for a minimal amount - reducing their risk while also giving you the opportunity to prove yourself a good borrower. Check out this loan savings calculator to see how much a high FICO Score can save you money.
That really means that the credit score number itself only means what the lender decides it means. What is considered bad credit by one lender may be acceptable to another. If you're looking to improve your credit score and want to prove you're a good credit risk, don't give up... no matter how low your score.
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