There’s a difference between what is lowest credit score possible and the lowest you can actually get [even if you tried]
Important: All the scores I will be talking about are in reference to FICO – which is the most widely used for lending decisions. There are a lot of other credit scores out there, like the VantageScore, but they’re not used by as many lenders.
FICO scores can range from 300 to 850. But even though 300 is technically the lowest credit score possible, it’s very unlikely you would hit it even if you tried. To get that you would have to do everything wrong and have absolutely zero positive credit history whatsoever. And, zero positive credit history is a very different thing than having no credit history. Someone with no credit history will have a low beginning credit score but not 300, as having no infractions on your records counts for something with the credit bureaus. In that regard they at least give a newbie the benefit of the doubt relative to someone who has trashed their credit.
In the real world, the lowest credit score you can possibly get will probably be around the high 300’s. For example if you:
- Just went through a bankruptcy and for the first time it is showing on your credit report
- If you have defaulted on multiple debts and had little to no payment history on those accounts prior to default (i.e. applying for a loan and defaulting a couple months later)
- You have recently gone through a foreclosure and have had severe late payments and/or defaults on at least one other line of credit
In those types of situations, you may fall into the 300’s. According to numbers from FICO, as of October 2013, just 5.8 percent of the population had scores between 300 and 499. So you can imagine the percentage of those hitting rock-bottom at 300 make up a tiny sliver of the population. For comparison, 18.6% of the population have scores between 800 and 850.
Even if you’re not at the absolute worst, anything under 600 is mostly useless when it comes to getting a credit card (unsecured), a mortgage or car loan with a decent rate.
How to improve a low credit score?
You can make your way from the poor credit category to the “fair” category (scores in the mid-600’s) sometimes in just a year or two, as long as you make the right moves. Here are five things you definitely will want to do:
- Maintain your good standing accounts, if you have any – Have any accounts you haven’t screwed up yet or are still open? Good. Make sure they stay that way.
- Check your credit reports – Is it possible you are being penalized for something incorrectly? Check your credit reports, to ensure the negative information that is weighing you down is accurate.
- Open secured accounts – Even those with low credit scores can still qualify for secured credit cards, which allow you to secure a credit line with a deposit. Because you’re fronting the cash, it’s more likely a bank will take a chance on you. Same holds true for secured loans, which you can get through a bank or credit union.
- Have patience – As your negatives start to age, your low credit score should begin improving, especially if you have a fresh, positive recent history of on-time payments. Unfortunately you can’t speed up the clock, but at least it’s reassuring to know that every month that goes by, your bad debt is a month older in the eyes of the credit scoring formula.
How high will you need to go?
The lowest credit score to buy a house with a mortgage might be as low as 620. But I stress that’s a big might because even though FHA underwriting guidelines don’t have a minimum score set in stone, if you are below 620 you will not be eligible for automatic approval and have to jump through many hoops with a manual process, which may not even yield results.
It can be hard to get approved with anything below a 700. However if you are buying a foreclosure directly from a bank, with that same bank also providing the mortgage, they might be willing to work with you to get that foreclosed home off their books.
The lowest credit score to get a credit card that is unsecured will likely be at least 650. With that type of score, you might be able to qualify for an entry-level card for fair credit. For the good reward cards you see advertised on TV, plan on having a 700 or above. If you are in the low-600’s or below, you may need to go with a secured card.
The lowest credit score to get a car loan ultimately depends on what type of interest rate you are willing to pay. To get those 0% offers you see advertised on new cars, you will probably need to be in the 700’s. If you’re in, say, the 500’s it still is possible to get a car loan but you will have to pay through the roof with an excessive APR rate.
Have a low score yourself? Then please share in the comments what it is and the circumstances that got you there.
Updated August 11, 2015