October 14th, 2010

Fair Credit Score? 3 Good Credit Habits To Start Now

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fair credit score

**Welcome to Do Today Thursdays here at Credit Karma Bootcamp: Your 31-Day Credit Health Plan. Every week, we’ll cover the 3 most useful moves to do now for your specific credit score range.**

The Average Joe or Jane with fair credit has a Credit Karma credit score in the mid 500s to the mid 600s. Joe and Jane are near the bottom credit score tier, so most lenders are on the fence about approving them or not. Banks, issuers, and lenders love fair credit consumers because if they do choose to extend credit, they can do so on their terms—i.e exorbitant loan rates, low credit limits, and additional fees—because fair credit consumers have limited options.

If you are in this credit score range, you may have several delinquencies on file and few credit lines available. The good news is that for lower credit score ranges, its easier to add points to your score with the right actions. If you can commit to perfect credit behavior for the next year, you’ll see dramatic progress in your credit score.

Time heals all credit issues. Stick to these key three good credit habits—beyond the “pay on-time and in full” mantra— over an extended period of time, and you’ll turn your credit score around to good credit.

  1. Clean up your credit report. Cleaning up your credit report every few months can be the fastest way to bring up your credit score. An error or inaccuracy on your report dings your credit score a significant amount. Disputing these charges to the credit bureaus and getting your credit report wiped clean can vastly improve your credit health within the next month. This habit is especially necessary to consumers who have settled any major financial issues such as debt settlement, defaulted payments, foreclosure, etc. Glance through your credit report to make sure records of these issues were recorded properly (like outstanding debts recorded as “Settled”) or have fallen off if old enough.

  2. Get out of debt. You hear this often enough, but at this credit score range, unloading debt effectively raises your score. Check out our Credit Simulator and take a look at what kind of wonders paying off your debt can do to your score. Focus on:
    1. Getting current and clearing old debts.
    2. Pay down existing debt. Deal with credit card debt as quickly as possible by always paying more than the minimum and resisting additional purchases on the card.
  3. Establish new credit lines and monitor credit use. You may have very few credit lines available at this point in time, so it is crucial to establish a credit line and manage it wisely. Secured credit cards are a good start because they have guaranteed approval and help build your credit. Instead of just using your card and expecting to build credit, carefully monitoring your credit utilization is a surefire credit score helper. On your new and current credit lines, make sure your total credit usage is less than 30% of your total available credit. Take a look at the correlation of average credit score to credit utilization; generally, the lower your credit usage, the better your score. Become a master at managing your credit cards now so that as your credit health improves and you earn better financial options, you can handle juggling more credit cards and higher credit limits.

CK Bootcamp Tip: With fair credit, establish all the key habits needed to elevate you to good credit and you could see an immediate jump in your credit score. The goal here is to commit to these habits long-term, which is the permanent track to healthier credit.



Credit Karma Bootcamp: Your 31-Day Credit Health Plan

Throughout October, Credit Karma Bootcamp gives you daily information on what you need to make wise, credit-savvy decisions when it comes to credit cards, mortgages, insurance, loans, and most importantly, ALL THINGS CREDIT.

Follow along to get financially fit and credit healthy.


Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.


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