Is 651 a Good Credit Score?
Is 651 a Good Credit Score?: When evaluating your financial health or creditworthiness, understanding your credit score is crucial. A 651 credit score falls within the “fair” range, and while it’s not considered poor, it can limit your borrowing options and impact the terms of credit you might receive. But what does a 651 credit score actually mean, and how can you improve it?
Read More:Â Understanding Credit Scores System: How It Works
What Does a 651 Credit Score Mean?
A 651 credit score places you in the “fair” credit category, which can be concerning as statistics show that 28% of consumers with a score in this range are likely to become seriously delinquent in the future. The credit score system, particularly the FICO score that ranges from 300 to 850, is a common metric used by lenders to gauge creditworthiness. A score of 651 suggests that there have been some credit missteps, such as late payments or high credit utilization, which have affected your score.
In comparison, the average credit score in the United States is 714, which is considered “good.” Falling below this average means you may face challenges when seeking credit or loans, often resulting in higher interest rates or the need for additional security, like a down payment or a co-signer.This credit score has been tabulated in a table below to describe what each credit score means for more illustrations:
| Credit Score | Credit Ratings | % of Population |
|---|---|---|
| 300-579 | Poor | 16% |
| 580-669 | Fair | 17% |
| 670-739 | Good | 21% |
| 740-799 | Very Good | 25% |
| 800-850 | Exceptional | 21% |
651 Credit Score: Credit Card and Loan Options
When it comes to obtaining a credit card or a loan with a 651 credit score, your options may be somewhat limited. Many lenders are hesitant to extend credit to individuals in the “fair” category without requiring additional security or charging higher interest rates. Here’s what you can expect:
Credit Cards for a 651 Credit Score
If you’re applying for a credit card with a 651 credit score, you might be asked to provide a security deposit. This is because credit card issuers see you as a higher risk and want to mitigate potential losses. Typically, the security deposit ranges from $500 to $1,000. Another option is to look into credit union starter cards, which may offer unsecured credit cards with low credit limits and high interest rates.
To improve your credit score, make sure to pay your monthly credit card bill on time and keep your credit utilization below 30% of your credit limit.
Personal Loans for a 651 Credit Score
Yes, you can still obtain a personal loan with a 651 credit score, but the options may be limited. Lenders willing to approve personal loans for borrowers with fair credit usually offer them at higher interest rates. It’s essential to carefully consider whether taking out a loan at a high interest rate is the best decision for your financial health, as it could lead to long-term debt issues.
An alternative to high-interest personal loans is a credit builder loan. These loans help you improve your credit score by placing the loan amount into a savings account until it’s paid off, at which point you gain access to the funds, plus any interest earned.
Home Loans with a 651 Credit Score
Surprisingly, a 651 credit score is just above the minimum threshold required by many conventional mortgage lenders, which is around 620. This means you could qualify for a home loan. Though, the terms may not be as favorable as they would be with a higher credit score. If you’re considering an FHA loan, the minimum FICO score requirement is 500 for a 10% down payment. Or 580 for a down payment as low as 3.5%.
Auto Loans for a 651 Credit Score
Auto loans can be obtained with a 651 credit score, but much like other loans, they will likely come with a higher interest rate. It’s advisable to focus on improving your credit score before taking out an auto loan to avoid the long-term costs associated with high-interest debt.
How to Improve a 651 Credit Score
Improving a 651 credit score requires a strategic approach to your finances. Here are several actionable steps to help you boost your credit score:
1. Dispute Negative Accounts on Your Credit Report
Obtain your credit report from the three major credit bureaus—Equifax, Experian, and TransUnion. Review it for any inaccuracies or negative items that you can dispute. Correcting errors can have a positive impact on your score.
2. Take Out a Credit Builder Loan
A credit builder loan is designed specifically to help individuals with poor credit improve their scores. Instead of receiving the loan amount upfront, it is held in a savings account until the loan is repaid. However, this is to help you build a positive payment history.
3. Get a Secured Credit Card
A secured credit card requires a deposit that serves as collateral. As you use the card responsibly and make timely payments, your credit score can improve over time. Eventually, you can qualify for an unsecured card.
4. Become an Authorized User
If you have someone in your life with excellent credit, ask them to add you as an authorized user on their credit card. This can help you build credit by piggybacking on their positive credit history. However, you will need to make sure to maintain good financial habits so you don’t harm their score.
5. Build Credit by Paying Your Rent
Rent payments typically don’t appear on your credit report, but you can use a rent reporting service to ensure they do. Consistently paying your rent on time and having it reported to the credit bureaus can help improve your score.
Frequently Asked Questions
1. What does a credit score of 651 mean?
A 651 credit score is categorized as “fair,” indicating that you’re considered a moderate credit risk. While it’s not a bad score, it may limit your ability to obtain loans or credit with favorable terms.
2. Can I get approved for a mortgage with a 651 credit score?
Yes, you can qualify for a mortgage with a 651 credit score, particularly for an FHA loan. However, the terms might not be as favorable as those offered to borrowers with higher scores.
3. Is it possible to obtain a personal loan with a 651 credit score?
Yes, but options may be limited, and the interest rates will likely be higher. However, Consider improving your credit score before applying for a loan to secure better terms.
4. What credit card options are available with a 651 credit score?
You may qualify for a secured credit card or a starter credit card from a credit union. These typically come with low credit limits and high interest rates.
5. How can I improve my 651 credit score?
To improve your score, dispute any negative items on your credit report, consider a secure credit card. However, you will need to become an authorize user on another account, and consistently pay your bills on time.
In conclusion, while a 651 credit score is not the worst, it’s certainly not the best either. With a strategic approach and disciplined financial habits, you can work towards improving your score. However, you will also gain a chance on securing better credit opportunities in the future.