Is a 646 credit score good? Credit scores range from a low of 300 to a high of 850. A score of 646 is considered "Fair".
It's in your best interest to improve your credit scores as much as possible. Credit scores are important when qualifying for a loan or mortgage, applying for a job or apartment, and for obtaining professional certifications, licenses, and security clearances.
If you improve your credit score by 74 points to a score of 720, your credit score will be considered "Good". A "Good" credit score will make it much easier to qualify for the best credit card offers and mortgage and loan interest rates.
Keep reading to learn how your credit score is calculated and how to improve it and protect it from damage caused by other people.
How Your Credit Score Is Calculated
There are multiple credit scoring models available, but the one most commonly used by lenders is the FICO. According to MyFICO.com, there are five main factors that influence your FICO credit score:
- Payment history: 35%. Making your payments on time is one of the most important factors that determine your credit scores. Payment history is also commonly evaluated as a separate lending criteria for many types of loans (for example, mortgages).
- Credit utilization: 30%. If you have high utilization (i.e., you're "maxed out") on your credit cards, expect your credit scores to take a hit even if you make your payments on time. Ideally, you want to keep your utilization on credit cards below 30% of the credit limit. This is important even if you pay off your credit cards in full every month.
- Credit age: 15%. Length of credit history contributes to good credit scores. Avoid closing old accounts unless absolutely necessary.
- Credit mix: 10%. Lenders like to see a mix of different types of credit accounts, such as revolving (credit card) accounts and installment loans like mortgages, car loans, etc.
- New credit: 10%. Be careful when applying for new credit cards or loans. Too many new accounts can damage your credit scores.
The FICO credit scoring model ignores factors such as race, color, religion, national origin, gender, and marital status. It also ignores where you live, your age, salary, occupation, job title, employer, employment history, and any items reported as child or family support obligations.
How We Categorize Credit Scores
Credit scores range from a low of 350 to a high of 850. We categorize credit scores as 'Poor', 'Fair', 'Good', and 'Excellent' using criteria similar to what mortgage lenders use:
- Poor: 350 to 619
- Fair: 620 to 719
- Good: 720 to 779
- Excellent: 780 to 850
What You May Qualify For With Your Credit Score
With a credit score of 646, you'll likely find it difficult to qualify for some credit card, mortgage, and loan products. If you do qualify, you'll likely pay a higher interest rate and fees than if your scores were 'Good'.
If you're interested in purchasing a home and you're not a veteran, your best bet may be an FHA mortgage.
If you're a veteran, you may want to consider a VA mortgage. VA mortgages are relatively easy to qualify for and have aggressive interest rates for credit scores similar to yours. If you receive VA disability income, you may also be exempt from the VA funding fee, which can make a VA mortgage even more attractive.
If you have an existing FHA or VA mortgage, you may be able to reduce your interest rate and payment with a streamline refinance. Streamline refinances commonly ignore credit scores.
If you're over 62 and a homeowner, you may be able to qualify for a reverse mortgage with your credit profile.
Your 646 credit score may still enable you to qualify for a variety of credit card offers, personal loans, and auto loans, but expect to pay a premium over what you would pay if your scores were higher.
How Can I Improve My 646 Credit Score?
Your credit rating is important - and not just for getting the best loan deal. Your credit profile may be scrutinized when you rent an apartment, apply for a job, or get a professional certification or security clearance. This is why it's important for your credit scores to be as strong as possible even if you have no plans to apply for a loan. Here are some tips for improving your credit score:
- Make payments on time without fail. If you want to improve your credit scores, the most important thing to do is make your payments on time. Payment history is the single largest credit scoring factor.
- Avoid overutilizing revolving accounts like credit cards. A high utilization can severely damage your credit scores even if you make your payments on time. This is a very common reason many people have credit scores in the 600s or low 700s even though they make their payments on time. Ideally, you want to keep your revolving balances below 30% of your credit limits at all times.
- Be careful with balance transfers. Credit card companies often set your credit limit on the new account equal to the amount you're balance transferring, which means you're 100% utilized (i.e., "maxed out") on the new account from the get-go. Your credit score may take a significant hit. If you're not planning to apply for loans in the near future, this may not matter, but it's something to keep in mind.
- Keep older accounts. If you'd like to close a few accounts, be sure to leave older accounts open. Length of credit history contributes to good credit scores. It's usually best to close out newer accounts before you start closing older ones.
- Don't open too many accounts at once. Be careful not to open too many new credit accounts at one time. If you're shopping aggressively for new loans or credit cards, your scores may take a hit.
- Clean up derogatory credit. If your credit score is 646, you may have some collections and charge offs in your credit file. These can have a significant negative impact on your scores, so it's important to get them cleared up as soon as possible.
Don't Let Somebody Else Destroy Your Credit
As we've covered, it's important to manage your credit properly so your score stays strong. However, it's also important to protect your credit from damage caused by others. Here are some tips for protecting your credit score:
- Cosign with care. When you cosign for somebody, you become legally obligated on the new debt. We recommend never cosigning at all. But if you must, make sure you're cosigning for somebody who will make their payments on time without fail. If they don't, your credit score will suffer. Be especially careful about cosigning for student loans. Student loans can make it tougher to get a mortgage for many, many years to come even if you're just a cosigner.
- Freeze your credit files. If you're not planning to apply for loans in the near future, we highly recommend freezing your credit files at the three major credit repositories: TransUnion, Equifax, and Experian.
- Protect your identity. It's not enough to just be careful about giving out your Social Security number. Your personal information is stored in a huge number of places, including lenders, federal agencies, credit repositories, insurance companies, etc. A single data breach can put your personal information into the hands of identity thieves who will destroy your credit. We highly recommend protecting your credit with identity theft protection.
Do Credit Inquiries Damage Credit Scores?
It's important to be careful with credit inquiries, but you don't need to be paranoid about them. It's not a problem if you incur a few credit inquiries as you shop for the best deal on a loan. If the inquiries are for the same type of loan and they occur in a short time frame, they're treated as one inquiry by the credit bureaus for credit scoring purposes.
Credit inquiries usually only damage your scores if you incur many of them in a short time window. You don't want to look like you're desperately shopping for a loan by having a lot of lenders run your credit (car dealers are notorious for this). If you do, your 646 credit score will likely suffer.
Again, credit inquiries are not usually a problem as long as you don't have an excessive number of them.
Remember, the credit reporting agencies make money from the lending industry.. They want people to apply for loans. They're not going to penalize you for shopping with a few lenders to get the best loan deal.
Periodically Check Your Credit
It's important to check your credit periodically to make sure there aren't any ugly surprises that could pop up the next time you apply for a loan. You can check your credit once per year for free at annualcreditreport.com (credit scores are likely an extra charge).
You wouldn't even think of posting your Social Security Number online, right? Unfortunately, there's a good chance somebody else already has. Are you a sitting duck for identity thieves?
Over 147 million Americans had their personal information (Social Security Numbers, account numbers, addresses, etc.) exposed in the Equifax data breach of 2017. That means there's nearly a 1 in 2 chance that some of your personal information was compromised.
If you haven't protected your identity yet, you're potentially a sitting duck for identity thieves. Data breaches happen all the time. It's not a matter of if, but when your personal information will be compromised.
Identity theft can wreck your good credit for years to come and be an absolute nightmare to clean up. Get protected today! I personally recommend Zander Identity Theft protection. I've been with them for over ten years, they're endorsed by Dave Ramsey, their prices are great, and their service and protection are excellent.
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