Do you know what a 656 credit score means?

What does a 656 credit score mean?

A 656 FICO(r) score places you in the demographic group of consumers likely to have their credit considered fair. Your FICO(r) Score of 656 is lower than the median credit score in the United States.   

Statistically, 28% of consumers in the acceptable range have the potential for severe defaults down the road. Some lenders do not like these odds and prefer not to work with individuals with a FICO(r) score within that range. However, lenders specializing in “subprime” borrowers might look for consumers in the Fair range but typically charge higher fees and interest rates. Consumers with FICO(r) scores in the Better field (670-739) or higher are generally offered considerably better terms. 

With a bit of work, you can probably get up to that range of scores (and maybe even above it), which can mean access to a broader array of loans and credits with better interest rates. The best way to work on improving your credit starts with checking your FICO(r) score. The report delivered along with your score will use details from your unique credit report to recommend ways to raise your score. If you focus on the issues highlighted in the news and adopt habits that contribute to a good credit score, you may see consistent score improvements — as well as the broader access to credit that typically comes with it.  

Reviewing the reports that come with your FICO(r) Score can help you determine what events caused the score to decline. If you fix the behaviours that led to these events and work consistently to improve your credit, you can set yourself up for better credit. 

The score is an aggregated summary of how well you have managed credit and bills. Good credit habits generally contribute to higher credit scores, whereas bad or inconsistent habits typically contribute to lower scores. Public information: If bankruptcy or other public records appear in your credit report, it could significantly negatively affect your credit score. Among consumers with a score of 656 on FICO(r), the average credit card debt is $13,429.   

Delinquent accounts and late or skipped payments hurt your credit score. A history of paying bills on time will help your credit score. It is pretty simple and the one most significant impact your credit score has, accounting for up to 35% of your FICO(r) score.   

To figure out your Credit Utilization Ratio, add the balances on your revolving credit accounts, like credit cards, and divide the results by your total credit limit. If you owe $4,000 on a credit card and your total credit limit is $10,000, your credit utilization rate is 40%. You may know your credit score would take a hit if you “maxed out” your credit limits, pushing utilization up to 100%, but you might not know that most experts recommend keeping the utilization rate under 30% to avoid hurting your credit score.   

Credit utilization accounts for approximately 30% of your FICO(r) score. Credit scores typically benefit from long credit histories. There is not much that a new credit user can do to help with this other than to avoid bad habits and try and build up a record of making prompt payments and sound credit decisions.    

The length of your credit history may make up as much as 15% of your FICO(r) score. Credit scores reflect your total outstanding debt and the types of credit you have used.

When you apply for a loan or credit card, you initiate a process known as a hard inquiry, where a creditor requests your credit score (and usually, your credit report). A complex search usually has a short-term negative impact on your credit score. As long as you keep making your payments on time, your credit score usually bounces back rapidly from the effects of a hard inquiry.      

Consider applying for a secured credit card. A secured credit card requires you to make a deposit equal to your spending limit–typically several hundred dollars. It ensures that when you use the card and make regular payments, the creditor reports your activities to national credit bureaus, which are recorded on your credit file.  

Consider the Credit Building Loan:

 These loans, available through many credit unions, come in many forms, but they are designed to help build personal credit. In one popular version, the credit union puts the money you borrow into a savings account, which earns interest but is not accessible until after you have paid the loan. Once the loan is paid in full, you can access the funds and accumulated interest. It is an intelligent savings tool, but credit unions also report your payments to national credit bureaus, so making regular, on-time payments could result in an improved credit score.    

Consider a debt management plan.

For families whose finances are stretched too thin to make their debt payments, a debt management plan (DMP) may provide some much-needed relief. Getting one requires working with a reputable credit counselling agency, which negotiates with your creditors to establish a manageable repayment plan.

Pay Your Bills on Time: Late and missed payments can damage credit scores, so avoid those. Take advantage of autopay, calendar alerts, and other automated tools–or just use post-it notes and a paper calendar.    

Avoid high credit utilization rates.

 High Credit Utilization, or the use of debt. Try to keep the usage rate across your accounts below about 30% to keep your score from dropping. Among consumers with FICO(r) credit scores of 656, the average utilization rate was 63.1%. Try to build up a potent mix of your credit.    

Try to establish a solid credit mix.

You should not borrow the money you do not need, but smart borrowing, including a combination of revolving credit and fixed-rate debt, can benefit your credit score. 

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