What Is a Bad Credit Score?

A bad credit score is a score from 300 to 639, based on WalletHub research, though different lenders may have their own specific standards to define bad credit. If you have bad credit, lenders will consider you risky to lend to, and you may face difficulty getting approved for a loan or credit card. If you are approved, you’ll probably face higher interest rates than someone with a good credit score.

Key Things To Know About Bad Credit Scores

• Bad credit is the result of some sort of financial mistake. People with a bad credit score may have declared bankruptcy, been at least 60 days late on a bill payment, or maxed out all their credit cards.
• Having a bad credit score signals to lenders and creditors that you are not responsible with money and increases your chances of being denied new credit or facing very high interest rates.
• Bad credit can easily end up costing you thousands of dollars.
• There’s no universal definition for bad credit for the same reasons there’s no single “real” credit score.
• A bad credit score is not a life sentence. You should be able to go from bad credit to fair credit in 12-18 months, if you’re careful.
• You can improve your credit score by paying your bills on time, paying down any existing debt, and limiting new credit inquiries.

Exactly how you should go about repairing your credit and how long that will take depend on how badly damaged your credit is in the first place. So your first order of business should be to check your latest credit score and see where you’re starting from. You can do that for free on WalletHub and get personalized credit improvement advice in the process.

Check Your Latest Credit Score – 100% Free

Below, you can read more about how bad credit can impact your finances and what you can do to fix a bad credit score.

How Does a Bad Credit Score Affect You? 

There are typically fewer and less attractive credit offers available to people with bad credit scores compared to people with higher credit scores, limited credit history, or even no credit. In fact, less than 20% of credit card applicants with bad credit get approved, according to data from the Consumer Financial Protection Bureau, compared to 70% of people with good or excellent credit scores.

Furthermore, even if you get a credit card with bad credit, you’re unlikely to get rewards or avoid an annual fee unless you place a refundable security deposit, which is required to open a secured credit card account.

In addition, only a small percentage of auto loans and mortgages go to people with bad credit scores, as you can see below.

Percentage of New Accounts Opened by Credit Score

Source: Equifax, Q4 2017 Consumer Credit Trends

The ability to obtain credit despite a bad score is crucial to rebuilding. You need a loan or line of credit reporting positive information to the major credit bureaus on a monthly basis to overcome the negative records already on your credit reports. You will need to get the ball rolling as soon as possible, given the high cost of a bad credit score.

*The chart above reflects national average rates as of December 2024. Although the underlying rates may change over time, the differential between good and bad credit will not.

So, in addition to making approval harder to come by, bad credit also increases the cost of borrowing. As a result, you probably don’t want to apply for a mortgage or an auto loan until you improve your credit score. The good news is that there’s a way to do that while still keeping costs low.

How to Fix a Bad Credit Score

The best way to fix a bad credit score is to add positive information to your credit reports. You can accomplish that by getting a credit card if you don’t already have one, paying your bills on time every month, paying down any existing debt, and trying to get your on-time rent and utility payments added to your credit report.

Pay Bills on Time

Your payment history has more of an impact on your credit score than anything else, and the more you pay your bills on time, the better it is for your score. If you are having trouble paying your bills on time, the following tips can help.

• Set up autopay. This is when you link your bank account so that your bill is automatically paid every month by the due date. This prevents you from missing a payment due to forgetting. Just make sure you have enough money in your bank account to avoid incurring an overdraft fee.
• Set a payment reminder. Mark in your calendar when a bill is due and set up a reminder to ensure you pay your bill before then. With a WalletHub account, you can set up payment reminders so you can avoid missing a bill.
• Change your due date. If you have a lot of bills due around the same time, it may be difficult to manage them all. Some companies may allow you to change your due date so you can manage your bills better.
• Seek assistance. If you just don’t have the money to pay your bill, contact the company right away. See if you can work out an arrangement that allows you to hold off on payments for a short period or pay less than the amount due, while still keeping your account in good standing. Preventing an unpaid bill from going on your credit report can help ensure your credit score doesn’t take a hit.

Learn more tips for paying your bills on time.

Get a Secured Credit Card

It may be difficult to get approved for a standard credit card or loan with bad credit, and without a credit card or loan, it’s not going to be easy to show creditors and lenders that you can be responsible with borrowed money. That’s where secured credit cards come in. Secured credit cards are great for rebuilding bad credit because:

• They are easy to get. Even people with very bad credit can get approved for a secured credit card. In fact, secured credit cards offer nearly guaranteed approval, and some don’t even check applicants’ credit.
• All major secured cards report account information to the credit bureaus. They do so on a monthly basis. If that info is positive, it will gradually cover up the mistakes that led your credit into bad territory. You can ensure that by never missing a due date.
• You don’t have to use the card to benefit. As long as you pay any annual fee your card may charge, you can lock it away. In other words, even a card with no balancegets credit for on-time payments and can help improve your score.
• Secured cards make credit improvement inexpensive. There are usually at least a handful of secured cards with no annual fee and many more offers with low yearly charges. That’s because you have to place a refundable security deposit, usually $200+, the amount of which becomes your spending limit. This protects issuers against the threat of people not paying their bills, but you get the money back (minus any amount owed) when you close your account.

However, the fact that you have to basically pre-pay whatever you charge to a secured card means such a card won’t provide any sort of emergency loan. For that, you will need an unsecured credit card for bad credit. Such cards will also help you build credit if you pay the bills on time, but they only make sense to get in emergency situations because of high non-refundable fees.

Pay Down Existing Debt

The amount of debt you owe plays a big role in determining your credit score, along with your credit utilization ratio. Your credit utilization ratio compares the amount of credit you are using to your overall credit limit. A credit utilization ratio that is higher than 30% is not good for your credit score. On average, people with bad credit have a credit utilization ratio of 80.7%, according to Experian, while people with very good credit have an average ratio of 15.2%.

Paying down your debts can bring down your credit utilization ratio and increase your credit score. WalletHub offers free debt payoff plans that can help you find the quickest way to pay off your debts while reducing the total amount of interest you have to pay.

Don't Apply for Credit Too Often

Every time you apply for credit, you’ll get a hard inquiry on your credit report that drops your credit score by around five points. Repeatedly applying for credit within a short period of time can impact your credit score even more and signal to lenders that you are desperate to borrow money.

It’s important to note that this doesn’t apply when you are rate shopping for an auto loan, student loan, or mortgage. Any credit inquiries for these types of loans within a 14- to 45-day window will count as a single inquiry, depending on the type of credit score.

Get a Personalized Credit Analysis

At the end of the day, everyone’s situation is a bit different, which means the specific solutions to bad credit must be, too. You can learn the best course of action for your circumstances by signing up for a free WalletHub account and reviewing your personalized credit analysis. We’ll tell you exactly what to fix, how to do it and how long it’s likely to take.

Get Your Personalized Credit Analysis – 100% Free

Generally, you can expect to see some credit score improvement within 12-18 months, assuming you have an open credit card account that’s in good standing.

Who Has Bad Credit Scores? 

Nearly one-third (31%) of U.S. adults have bad credit, according to WalletHub data. The average person with bad credit is 41 years old and earns nearly $46,000 per year.

Some people with bad credit make a lot of money, while others don’t. And some states have a higher percentage of people with bad credit than others, due to a variety of factors. Below, you can see where the biggest battles against bad credit are being waged.

There are various reasons why someone may have bad credit. It could be due to the combination of limited credit history and a couple of missed payments, for example, which would be pretty easy to overcome. Or it might be the result of a major financial event, such as bankruptcy or foreclosure, which will likely take years to recover from.

For more information on escaping poor credit, check out WalletHub’s guides on how to rebuild credit and how long it takes.