Your credit score is one of the most important numbers in your financial life. It tells lenders quickly how creditworthy you are and can affect whether you get credit and the interest rates you pay. What does a 637 credit score mean, and how can you raise it? This article will tell you everything you need to know.
What is a Credit Score?
A credit score is a three-digit number calculated from the information in your credit reports It ranges from 300 to 850 The most commonly used credit scores are FICO Scores and VantageScores.
Credit scores help lenders decide if it’s safe for them to lend you money. In general, the higher your score, the lower your risk. This means you have a better chance of being approved and the interest rates are lower.
Credit scores are not set in stone. They fluctuate as your credit report changes. Things like late payments, opening new credit accounts, and getting new inquiries can cause your score to move up or down.
Credit Score Ranges
Credit scores fall into different ranges that give lenders a quick assessment of your creditworthiness:
- 800-850: Exceptional
- 740-799: Very Good
- 670-739: Good
- 580-669: Fair
- 300-579: Very Poor
A credit score of 637 is in the fair range. It is below average, and most lenders consider it subprime. It will be harder to get credit, and you’ll have to pay more in interest.
What Does a 637 Credit Score Mean?
Specifically, a credit score of 637 indicates:
- You have a history of missed or late payments
- Your outstanding balances are high compared to your credit limits
- You have a short credit history and/or limited types of credit
- You may have had past collection accounts or bankruptcies
To put it another way, a credit score of 637 tells lenders that you are a risky borrower. It will be hard for you to get most credit cards, auto loans, and mortgages. You will have to deal with less-than-ideal terms on the ones you do get, such as high APRs, low borrow amounts, and high security deposits.
Some key stats on a 637 credit score:
- 17% of consumers have scores between 580-669 (Experian)
- The average credit card APR for this score range is 20.73% (WalletHub)
- Only 5% of new car loans go to borrowers with scores under 640 (Experian)
As you can see, a 637 credit score puts you at a big disadvantage when it comes to accessing affordable credit. The good news is there are steps you can take to start improving your score.
How is a Credit Score Calculated?
Credit scores take into account five main factors from your credit reports:
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Payment history (35%) – Whether you pay your bills on time. Late payments can severely lower your score.
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Credit utilization (30%) – The ratio of credit you’re using compared to your limits. Using more than 30% hurts your score.
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Length of history (15%) – How long you’ve had credit. A longer history helps your score.
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New credit (10%) – Opening new accounts can ding your score in the short term.
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Credit mix (10%) – Having different types of credit – credit cards, installment loans, mortgages, etc.
Payment history and credit utilization have the biggest impact. That likely explains the 637 score – a history of missed payments and high balances relative to limits.
How to Improve a 637 Credit Score
Boosting your credit score from fair to good takes time and discipline. But it’s doable with the right habits. Here are some tips:
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Review credit reports – Make sure there are no errors dragging down your score unnecessarily. Dispute any inaccuracies with the credit bureaus.
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Pay all bills on time – Set up autopay or reminders to avoid missed payments. Even one late can severely hurt.
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Get below 30% utilization – Pay down balances and limit charges. Ask for credit line increases.
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Avoid new credit applications – Each application causes a hard inquiry that dings your score a few points. Only apply for credit you need.
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Become an authorized user – Get added as an authorized user on a spouse or family member’s old credit card. It can give your score a boost.
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Ask for goodwill deletions – If you have a one-off late payment, ask the lender to remove it from your credit report. It works sometimes.
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Wait it out – Negative items fall off your reports after 7 years. As time passes, the impact lessens.
With diligence and patience, you can improve your credit score significantly in 12-18 months. Once you get over 700, you’ll have access to great credit products.
Alternatives with a 637 Credit Score
If you need credit before your score improves, there are options tailored to fair credit that can help you avoid predatory lending:
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Secured credit cards – Require a refundable deposit that becomes your limit. Use responsibly and make payments on time.
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Credit-builder loans – Banks place money in a savings account and report on-time payments. The money is released when the loan is paid off.
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Non-traditional mortgages – FHA loans only require a 580 score. USDA and VA loans have flexible credit requirements.
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Subprime auto loans – Higher interest rates but more flexible credit requirements. Can help reestablish credit.
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Debt management plans – Work with a nonprofit credit counseling agency to negotiate lower interest rates and monthly payments with creditors.
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Subprime personal loans – Online lenders provide personal loans tailored to fair credit borrowers. Interest rates are higher.
Takeaways
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A 637 credit score is considered fair by most lenders and below the average score of 717.
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Fair credit scores mean higher loan rates and difficulty getting approved for prime credit products.
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Payment history and credit utilization are big factors impacting a 637 score.
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Raising your score requires diligently building credit with on-time payments and lower balances.
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With patience and discipline, you can boost your score over 700 within 12-18 months.
Knowing your credit score and continually monitoring your credit reports are important steps towards financial well-being. Even if your score isn’t where you want it yet, positive credit habits will help increase it over time. Be persistent and you can reach your goals.
Past deeds (and misdeeds) feed your credit score
Credit-scoring systems such as FICO® use information compiled in your credit reports to calculate your score. More recent events in your credit history tend to count more than older activities and, as with any type of analysis, some kinds of information carry more weight than others. Knowing which activities matter most can help you prioritize the steps to take when working toward a better credit score:
Late and missed payments are among the most significant factors to your credit score. More than one-third of your score (35%) is influenced by the presence (or absence) of late or missed payments. Lenders want borrowers who pay their bills on time, and individuals who have missed payments are statistically more likely to default (go 90 days past due without a payment) than those who pay their bills on time. If late or missed payments are part of your credit history, you can do yourself and your credit score a favor by developing a routine for paying your bills promptly.
Utilization rate on revolving credit is responsible for nearly one-third (30%) of your credit score. Utilization, or usage rate, is a technical way of describing how close you are to “maxing out” your credit card accounts. You can measure your utilization on an account-by-account basis by dividing each outstanding balance by the cards spending limit, and multiplying by 100 to get a percentage. You can also calculate your total utilization rate by dividing the sum of all balances by the sum of all spending limits.
| Balance | Spending limit | Utilization rate (%) | |
|---|---|---|---|
| MasterCard | $1,200 | $4,000 | 30% |
| VISA | $1,000 | $6,000 | 17% |
| American Express | $3,000 | $10,000 | 30% |
| Total | $5,200 | $20,000 | 26% |
Most experts agree that utilization rates in excess of 30%— on individual accounts and all accounts in total—tend to lower credit scores. The closer any of these utilization rates gets to 100%, the more it hurts your credit score.
Age is your friend. All other factors being the same, the longer youve been a user of credit, the higher your credit score is likely to be. Theres not much that can be done about that if youre a new borrower, and it also doesnt help much if your recent credit history is marred by late missed payments or high utilization rates. If you manage your credit carefully and stay timely with your payments, however, your credit score will tend to increase with time. Length of credit history is responsible for as much as 15% of your credit score.
Your total debt and its composition are responsible for about 10% of your credit score. The FICO® credit scoring system tends to favor individuals with multiple credit accounts, consisting of a mix of installment loans (e.g., car loans, mortgages and student loans, with set monthly payments and fixed payback periods) and revolving credit (accounts such as credit cards that enable you to borrow against a spending limit and make payments of varying amounts each month).
Credit applications and new credit accounts typically have short-term negative effects on your credit score. When borrowers apply for new credit or take on additional debt, they assume greater risk of being able to pay their bills. Credit scoring systems like FICO® typically cause scores to dip a bit when that happens, but scores will typically rebound within a few months as long as you keep up with all your payments. New-credit activity can contribute up to 10% of your overall credit score.
Public records such as bankruptcies have severe negative impacts on your credit score if they appear on your credit report. Because they do not appear in every credit report, these entries cannot be compared to other credit-score influences in terms of percentage, but they can eclipse all other factors and severely lower your credit score. A bankruptcy, for instance, can remain on your credit report for 10 years, and may effectively prevent you from getting credit for much or all of that time.
From Fair to anywhere: Raising your credit score
A FICO® Score in the Fair range typically reflects credit-management problems or mistakes, such as multiple instances of payments that were missed or paid 30 days late. Consumers with more significant blots on their credit reports, such as foreclosures or bankruptcies, may also see their FICO® Scores rise from the Very Poor range (300-579) into the Fair range once several years have passed after those events.
If you examine your credit report and the report that accompanies your FICO® Score, you can probably identify the events that lowered your score. As time passes, those events negative impact on your credit score will diminish. If youre patient, avoid repeating past mistakes, and take steps that can help build up your credit, your credit scores will likely begin to increase.
Is 637 a good credit score? Can I buy a car or get a credit card?
FAQ
What are the consequences of having a 637 credit score?
Although a 637 credit score is not poor, it is also not good either. As a result, some lenders might reject credit applications from borrowers with 637 credit scores as having bad credit, while others might approve your loan but are likely to charge high-interest rates and fees.
How can I improve my 637 credit score?
Some of the ways that might help you increase your 637 credit score are: The holy grail of improving your credit score is to pay your bills on time. If your credit score is 637 and you are looking for ways to increase your credit score, this is the way to go.
Are lenders willing to work with consumers with a 637 credit score?
Very few personal loan lenders will approve you for a personal loan with a 637 credit score. However, there are some that work with bad credit borrowers. But, personal loans from these lenders come with high interest rates.
What is the average credit score in the US?
The average credit score in the U. S. is at an all-time high of 711. This coincides with what the Consumer Financial Protection Bureau defines as ” prime . ” About 1 in 5 American adults either have no credit history (“credit invisible”) or are unscorable.
How good is 637 credit score?
A 637 credit score is not good; it’s fair, and 33 points below the good range. Financial products may be available, but with higher interest rates and less favorable terms.
What can I do with a 637 credit score?
Important Facts to Know About a 637 Credit Score: You can borrow money in most situations, but the terms probably won’t be good. For example, you could borrow a small amount with certain unsecured credit cards or a personal loan for damaged credit, but the interest rate is likely to be high.
Can I buy a car with a 637 credit score?
Most approved borrowers have credit scores of 661 or higher, but there is no set score to get an auto loan. Having a credit score below 660 could make it harder and more expensive — though not impossible — to finance your car.
What is considered a good credit score?
Quick Answer. For a score with a range of 300 to 850, a credit score of 670 to 739 is considered good. Credit scores of 740 and above are very good while 800 and higher are excellent.