Is a 650 Credit Score Considered Favorable?

Believe it or not, your credit score is really important. It can affect your job opportunities, how much interest you pay on a loan, and even if you can get a loan at all. Since the Great Recession and the housing market slump, getting a loan has become tougher. A FICO score of 650, which used to be okay for borrowing, might be a challenge now.

The Fair Isaac Corporation, which created the FICO score, rates these scores from 300 to 850. In 2009, a report showed that over 58% of people in the US had scores of 700 or above, while only 15% had a score of 650. Surprisingly, just 27% of people had scores of 649 or below.

If your FICO score is between 650 and 699, you’re seen as a moderate credit risk. This means you’ll likely face higher interest rates than those with scores over 700. When it comes to car loans, this could mean paying hundreds more in interest, and for home loans, the extra costs can easily run into thousands of dollars.

Finance journalist Liz Pulliam-Weston highlights this issue. She compared two friends who behave the same with their finances over 40 years but have different credit scores: one at 750 and the other at 650. In her example, the person with a 750 score pays 10.99% interest on credit cards, while the one with a 650 score pays 19.99%. High rates like these make it tough to pay off the principal and reduce debt, especially if you’re only making minimum payments. Even more startling, on a 30-year, $400,000 mortgage, the person with the lower score ends up paying $73,217 more in interest compared to the one with a higher score.

Nonetheless, having a 650 credit score isn’t the end of the world. You’re not far from 700, which is considered a low-risk score. With some effort and smart moves, you could boost your score over 700, joining the 58% of Americans with lower-risk credit profiles and enjoying lower interest rates.

To improve your credit score, educate yourself with helpful guides like “How to Improve Your Credit Score.” You can check your credit scores for free online and track your progress as you work on boosting your score. Although a credit score of 650 can be a drawback in today’s economy, with persistence and careful planning, you can raise your score above 700 and benefit from lower interest rates. It’s time to improve that score before your next big purchase.