Do you have a credit score of 603?
A credit score of 603 is considered to be in the Fair range. It means that lenders are likely to consider you for loans and lines of credit but with interest rates that are higher than average. You may also find it challenging to get approved for some types of mortgages or other financing options.
The good news is that there’s still time to improve your credit rating so you can qualify for better loan terms and lower interest rate when shopping around for new financial products.
There are many ways you can boost your creditworthiness beyond just paying down debt, which includes making sure all accounts on file belong to you (and not someone else), keeping balances low relative to limits, avoiding opening too many new accounts at once, etc.).
It’s important not only because it will help raise your overall FICO Score but also because having a solid FICO Score could save thousands over several years in interest payments alone!
And if you ever need financing again in the future (such as applying for another mortgage), having a good FICO Score will make getting approved much easier and faster than before.
So what steps should you take now? We’ll provide you with everything you need to know to improve your credit score starting today!
Understand the Credit Score Range
In general, a credit score is used to measure the risk of default on a loan.
In other words, it’s a number lenders use to predict your likelihood of paying back borrowed money in a timely manner.
For example, someone with a credit score of 800 is considered less likely to have debt problems than someone with a score of 400, who is regarded as a much more considerable credit risk.
As you can see, the lower your score is, the less likely it is that lenders feel confident in your ability to make timely payments. On the other hand, anything above 740 is considered an excellent credit rating.
Your credit score falls within one of 5 ranges:
Poor 350-580: If your score falls in this range, you’re considered a credit risk and will likely be charged high interest rates when applying for new financing. More often than not, you’ll be turned down for credit cards, loans, and lines of credit. Typically, you will have had numerous delinquencies and/or past due accounts and a history of bankruptcy.
Fair 581-669: If you fall in this range, your financial history shows that you occasionally struggle when it comes to paying back debt. However, you are not likely to miss payments or accrue too much debt in any given month. You can get approved for a loan or line of credit, but your interest rates and terms will be worse than those with higher scores.
Good 670-739: If your score is in this range, you’re considered a good credit risk for lenders. This means you probably have no trouble paying off loans or debts on time and keep your accounts open (even if there’s no activity). As a result, you are likely to get approved for credit cards, loans, and lines of credit with attractive rates.
Very Good 740-799: If you have this score, lenders consider you an excellent customer – someone who is most likely very responsible when it comes to managing finances. Not only are you less likely to miss or be late on payments but also you are willing to make on-time payments more often than not.
Excellent 800+: According to creditors, if your score reaches this range, you are considered a world-class customer. You have excellent credit and likely own several different accounts with numerous lenders. Your FICO Score is in the upper tier of all scores evaluated by lenders. With an 800+ credit score, you can expect to receive desirable interest rates and terms on loans and lines of credit.
Credit Score Factors
Your credit score is based on five primary factors: Payment History, Credit Utilization, Length of Credit History, New Credit, and Credit Mix. While these items are essential parts that make up your credit score, they are weighted differently.
Payment history: This accounts for about 35% of your overall FICO Score and is the single most important factor. It includes any late or missed payments on all credit accounts, from credit cards to mortgages. Late or missed payments can result from taking on too much debt, not having enough money to pay for expenses, or just general carelessness. Missed or late payments have a severe impact on your score.
Credit utilization: This accounts for about 30% of your credit score and is mainly considered the amount of outstanding debt you have at any given time compared to the total available credit limit. For example, if you owe $1,000 on your credit card and the limit is $3,000, your utilization rate would be 33%. The lower this number compared to your total credit, the better. Lenders typically consider a rate of 30% or lower to be “good” and a score above the range.
Length of credit history: This accounts for about 15% of your credit score and is everything that makes up your history when it comes to taking out loans/credit cards. It makes sense that the longer you have been working on managing credit, the better you are at it. The longer your credit history is, the more positive marks you will have on your record, translating into a higher score. Even if you have some late payments, the fact that you have been working on your credit for a long time will outweigh those negatives.
New credit: This accounts for about 10% of your score and analyzes the number of times you’ve taken out new loans or opened up new credit card accounts. If you open several cards within a short period of time, it can look somewhat suspicious to creditors. On the other hand, opening several credit cards over a long period of time is not as bad as you may think. As long as you are managing your accounts responsibly, opening several new credit cards (for example, for travel rewards) is not likely to have a negative impact on your score.
Credit mix: This accounts for about 10% of your credit score and is determined by the different types of accounts you have under your name. For example, having a loan, credit card, mortgage all in one place will likely show creditors that you can manage multiple types of debt. This is important if you are applying for an auto loan or mortgage, as these lenders typically want to know that you are responsible with all types of credit before they hand over significant amounts of money.
Getting Approve with a 603 Credit Score
Credit Cards
Getting approved for a credit card with a 603 credit score is not likely to be an issue as long as you meet the basic criteria for approval. However, remember that each issuer will have its own standards and guidelines, so you should check with them directly if they have any specific requirements.
Keep an eye on the APR, as credit cards with higher rates may not be an option. Some of the best credit cards for fair credit include Capital One and Discover Cards.
Home Loans
A home loan with a FICO score of 603 will be tough to get approved by a typical financial institution. Mortgage lenders will likely need a down payment of 20% to qualify for a conventional loan with decent rates.
FHA loans, however, will make it a bit easier as they require as little as 3.5% down and allow for lower credit scores, with scores up to 580 being approved for this type of loan.
It’s important to keep in mind that an FHA loan typically include higher interest rates. If you can manage a higher rate, it’s recommended as the long-term benefits (for example, tax-deductibility) will outweigh any upfront costs.
Auto Loans
It’s possible to get approved for a car loan with a score as low as 603, but you will want to make sure the lender is willing to work with you first. You may need to go through subprime or high-risk lender to qualify.
Keep in mind that the rates for these loans are typically higher due to the increased risk associated with lending money to people with lower scores.
Home Equity Loans
Home equity loans are a great way to get approved when you have bad credit or no other options for borrowing money.
The lender simply wants to ensure that you can afford the loan and that your property has significant equity in it. The only downside is that these loans typically have a much higher rate than other types of loans.
Personal Loans
Getting a personal loan with a score as low as 603 is not difficult. Personal loans are a great way to consolidate debt from several credit cards or finance other large purchases such as furniture, medical bills, etc.
The downside is that the rates for a 603 credit score can be higher than what you would pay on a credit card, and you will need to have sufficient income to qualify for the loan.
10 Tips to Improve your 603 Credit Score
1. Get a Copy of Your Credit Report
To improve your credit, you need to understand what’s on your credit report and what areas to focus on.
If you visit AnnualCreditReport.com, you can get a free copy of your credit report from each of the three major credit bureaus. The service is free and is sponsored by the major credit bureaus.
2. Dispute Inaccurate Information
Once you have a copy of your credit report, you need to go through it and identify any errors. This can be as simple as a misspelled name, incorrect address, or information about the wrong loan.
It’s also a good idea to take a look at your public records as you might find that there’s some inaccurate information on those as well. In many cases, these errors are due to identity theft and not your fault, but they will negatively affect your score, so you need to get them fixed.
3. Fix Your Past Due Accounts
If you have past-due accounts, make sure to get them caught up as soon as possible. If the account is sent to collections, it will drastically impact your credit and could even cause you to be denied additional credit in the future.
There are several ways that you can pay off past due accounts: lowering your payment, calling the creditor and asking for an extension, or transferring the balance to a new card with lower interest to pay it down faster.
The more accounts on your credit report which are paid as agreed, the better. It may even be worth paying off past-due accounts if you have good enough credit elsewhere to qualify for a balance transfer.
4. Focus on Your Credit Card Balances
If you have several credit cards with high balances, consider transferring them to a new card if possible so that you can pay the debt down faster. You will want to ensure there are no annual fees associated with transferring your balance since these are typically waived for the first year.
If you don’t have a good credit score, you will need to start your search with a low-interest rate credit card and work your way up.
5. Pay Off All Other Balances
Once you have settled any late payments or debts in collections, make sure that you pay off all other balances on time going forward. Make it a priority to pay the minimum due on time each month and make a point to pay more than the minimum if you can afford it.
6. Pay Your Bills On Time
While this seems obvious, it needs to be said. It’s important to always pay your bills on time going forward, even if you can only pay the minimum monthly payments. You should set up reminder alerts for yourself or check your credit report frequently to catch any late payments in advance.
It is essential to understand that any late payments by your utility companies or other creditors can have a negative impact on your credit score.
7. Keep Old Credit Cards Open
It’s important to keep old credit cards open even if you don’t use them anymore. This will have an impact on your average age of accounts which is a factor used in your credit score. You should try to keep all of the old credit cards open if at all possible so that you can maintain this important part of your credit history.
8. Avoid Credit Inquiries
If at all possible, you should avoid signing up for new credit accounts and only use your existing accounts. Every time you apply for credit, it will make an inquiry on your credit report. Too many inquiries within a short period of time can negatively impact your credit score.
9. Improve your Credit Utilization Ratio
Many people don’t realize that the amount of money available to you on credit cards and other revolving lines of credit is a huge factor in your debt to debt ratio. For example, if you have a credit card with a $1,000 limit and a balance of $800, you are utilizing 80% of your available credit.
If you pay off this debt in full each month, it will have little to no impact on your credit score since the amount of debt isn’t changing. However, if you continue to carry this balance month after month, it will dramatically impact your credit score.
Pro Tip: Besides paying off your debt each month, consider asking your credit card company for a credit line increase. This will lower your debt to credit ratio and can help improve your credit score.
10. Have the Right Credit Mix
Having the right mix of credit (installment loans like mortgages and auto loans, installment credit cards, etc.) will be another important factor in improving your credit score. If you do not have any installment loans, make sure to apply for one before applying for new credit like an auto loan or a mortgage.
A reputable company like Capital One can help you improve your credit score through a number of installment loans.
Credit Repair Services
While many of these tips you can do on your own, you may want the assistance of a professional service that has experience in credit repair if you need to improve your credit quickly. This can be a good option if you need negative items removed from your credit report, as removing them yourself can take a while.
Companies such as Lexington Law and Credit Saint have helped thousands of people improve their credit by working with creditors or a credit bureau on your behalf to remove inaccurate or negative items on your credit report.
How Long Will It Take to Improve My Score?
It will take time to improve your credit score. Some people see an improvement after 30 days, while others may take several months if they have several items to dispute. It should take about three to four months to see significant improvement in your credit score in most cases.
If you follow these tips, you can expect your credit score to improve over time. However, you may want to check your score every few months to know when it is improving and by how much. Just be sure not to apply for any new lines of credit while working on improving your credit score.
Conclusion
Improving your credit score is a process, and it will take time. However, the more you work on improving your credit, the faster you’ll see an improvement in your score. In most cases, you’ll see your score improve by about 20 to 30 points every three months. This will be much faster than trying to do it on your own.
The best thing you can do to improve your credit score is put a plan together, stick to it, and trust the process. If you need to improve your score quickly, consider hiring a credit repair agency. While you will pay a fee for the service, it could be worth it if you’re in the market to buy a house or car and need a loan.
If you follow these tips for how to improve your 603 credit score, we’re confident that there’s no limit to what you can achieve!
