August 7th 2023.
Is a FICO Score of 600 Good or Bad Credit?
When it comes to your credit score, it's important to know the range in which your score falls. A FICO score of 600 is in the fair credit score range, but on the lower end of the spectrum. This means it is considered a subprime credit score, which is generally considered bad or approaching a bad credit score.
What does this mean for you? It means you still have financing options, like a personal loan or credit card, but they are more limited and will have higher interest rates and fees. If your score dips below 600 and below 580 specifically, you will enter bad credit score territory and have even more limited options.
Lenders consider it risky to loan money to borrowers with a 600 FICO score. According to Experian, 27% of consumers with a fair credit score are likely to become seriously delinquent in the future. To put this into perspective, 83% of the population has a credit score over 600. In 2022, the national average credit score was 714, meaning 600 is well below average.
FICO® Credit Score Ranges
When it comes to credit scoring models, FICO credit scores are the most widely used. Over 90% of the top lenders use FICO scores to make financing decisions. FICO score ranges are: exceptional (800-850), very good (740-799), good (670-739), fair (580-669), and poor (300-579).
However, FICO score ranges are also based on a prime credit scoring model. Those ranges are: super-prime (720-850), prime (660-719), near-prime (620-659), subprime (580-619), and deep subprime (580 and below).
What Can I Finance with a Credit Score of 600?
It is possible to finance certain things with a credit score of 600, but the options are limited. Mortgages, auto loans, and credit cards are all possible. However, you will pay higher interest rates and fees, and you may have to make a larger down payment.
How Are Credit Scores Determined?
The three major credit bureaus, Experian, Equifax, and TransUnion, calculate your credit score based on the information in your credit report, called your credit history. It includes how many credit cards or personal loans you have, current credit card balances, loan debt, available credit, and more.
Each of the five key factors in your credit history are weighted differently: payment history (35%), amounts owed (30%), length of credit history (15%), credit mix (10%), and new credit (10%).
Are there Small Business Loans for a Credit Score of 600?
Yes, there are small business loan options if you have a credit score of 600, but your options will be limited. Most traditional lenders, like banks and credit unions, won't lend to small business owners with a FICO score of 600. Instead, you'll likely have to apply to an alternative lender or marketplace. Alternative business lending platforms often provide convenient online applications with fast approval and funding times, however, you'll likely have higher interest rates and fees. Examples of alternative business loans that could be available with a 600 FICO score include: business line of credit, business term loan, equipment financing, accounts receivable financing, merchant cash advance, revenue-based financing, and working capital loans.
Is a FICO Score of 600 Good or Bad Credit?
A FICO score of 600 is considered a subprime credit score and is generally considered bad or approaching bad credit. This means that while you may still have access to some financing options, such as a personal loan or credit card, they won’t be as desirable.
In fact, lenders will be hesitant to loan money to borrowers with a 600 FICO score. According to Experian, 27% of consumers with a fair credit score are likely to become delinquent in the future.
To put this score in context, 83% of the population has a credit score above 600, and the national average credit score in 2022 was 714. A score of 600 is well below average.
FICO® Credit Score Ranges
FICO credit scores are the most widely used credit scoring models, with 90% of top lenders using FICO scores to make financing decisions. The FICO score ranges are:
Exceptional: 800-850.
Very good: 740-799.
Good: 670-739.
Fair: 580-669.
Poor: 300-579.
These FICO score ranges also have a prime credit scoring model. These ranges are:
Super-prime: 720-850.
Prime: 660-719.
Near-prime: 620-659.
Subprime: 580-619.
Deep subprime: 580 and below.
What can I Finance with a Credit Score of 600?
When you have a credit score of 600, your options for consumer financing are limited. Here’s what you can expect when seeking financing with a credit score of 600.
Mortgages
Home loan lenders typically require a minimum credit score of 620 for a conventional mortgage loan. However, some programs could help homebuyers with a credit score of 600 to get approved. The most well-known low credit mortgage options are government-backed FHA loans. You could get approved for an FHA mortgage with as little as 3.5% down with a credit score of 600.
Auto Loans
Most auto loan lenders prefer prime credit scores of 661 and above. However, if you make a larger down payment, you may be able to get a smaller car loan with a 600 FICO score. But it’s more difficult, and you’ll pay a higher interest rate.
Credit Cards
It is possible to get a credit card with a fair credit score, but your APR will be higher. The card will likely have a lower credit limit and may include an annual fee or other fees. Traditional credit card issuers and dedicated subprime lenders both issue subprime credit cards. You could get an unsecured credit card, but getting a secured credit card would be easier, which requires a cash deposit to secure the credit line. Subprime credit cards also won't have the same rewards programs that come with prime or super-prime credit cards.
How are Credit Scores determined?
The three major credit bureaus, Experian, Equifax, and TransUnion, calculate your credit score based on the information in your credit report, called your credit history. This information includes how many credit cards or personal loans you have, current credit card balances, loan debt, available credit, and more.
Each of the three credit bureaus produces a credit report, so your FICO score may differ at each bureau. They base your credit score on five key factors in your credit history. Each one is weighted differently:
Payment history: 35%.
Amounts owed: 30%.
Length of credit history: 15%.
Credit mix: 10%.
New credit: 10%.
Payment History
Payment history is the most significant factor contributing to credit. Positive payment history leads to high credit scores. Late payments lower a credit score. Defaults, charge-offs, and foreclosures significantly lower credit. 39% of consumers with a 600-credit score have late payments of 30 days past due in their credit reports.
Amounts Owed
The amount of debt a person has is the second largest factor impacting credit. The credit bureaus use the credit utilization ratio, which is the percentage of available credit currently being used. For example, a credit card balance of $1,000 on a $10,000 limit is a 10% credit usage ratio. Keeping credit utilization under 30% increases credit scores. People with exceptional credit have single-digit credit usage.
Length of Credit History
Length of credit history, also called account history or time in file, refers to how long you’ve had active credit accounts. The longer an account is open, the better. It demonstrates an established history of managing credit and debt.
Credit Mix
While it only makes up 10% of your FICO score, having different types of credit is good. Examples include revolving credit, installment loans, and mortgages.
New Credit
Applying for new credit requires a hard credit inquiry, and each inquiry can lower your FICO score by five points. Hard credit inquiries stay on the credit report for two years but generally only impact your credit score for the first year.
Are there Small Business Loans for a Credit Score of 600?
Yes, there are small business loan options if you have a credit score of 600, but like with consumer financing, your options will be limited. Commercial lenders consider your personal and business credit when approving loans. Personal credit scores are more important if you don’t have business credit yet.
Most traditional lenders, like banks and credit unions, won’t lend to small business owners with a FICO score of 600. Instead, you’ll likely have to apply to an alternative lender or marketplace. Alternative business lending platforms often provide convenient online applications with fast approval and funding times. However, if applying for a subprime business loan, you’ll likely have higher interest rates and fees.
Examples of alternative business loans that could be available with a 600 FICO score include:
Business line of credit.
Business term loan.
Equipment financing.
Accounts receivable financing.
Merchant cash advance.
Revenue-based financing.
Working capital loans.
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