645 Credit Score – What does it mean & How to Improve It? (2022 Update)
Credit scoring is a tool used by lenders to help them make lending decisions as to whether they will lend you credit or a loan based on credit reports. They use scoring models which are basically computerized formulas which are made by studying how and which consumers fulfilled their promise and repaid their debt over a specific period. The higher your FICO score, the lower the risk thus making you credit worthy. You should, therefore, strive to achieve and maintain a good credit score as it affects several aspects of your life.
Achieving and maintaining a good score is a perfect way of keeping your finances in check. By improving your 645 credit score, you will be able to take a loan when planning to make big purchases such as buying a car or a home or even starting a business. That’s why it’s important to understand if it’s “good” or “bad“. A good credit score also gives you negotiating power, banks will consider you a sure bet and give you low interest rates thus saving you money eventually.
Is 645 credit score good or bad?
Credit scores range from 350-800. Basically, those with high scores are considered less of a risk and thus more credit worthy as compared to those with low scores. Credit score 645 and below is usually considered as poor. A 645 credit score is likely to impact your life negatively. With such a score, you are likely to miss employment opportunities from some employers who review your credit score, you are likely to have your loan request declined and it will cost you so much more in interest rates as compared to those with good and excellent credit scores.
What does a 645 credit score mean and how it affects your life?
A credit score of 645 is considered poor, however, it will still get you an auto-loan, some types of credit cards, a home loan and even a personal loan, especially from online lenders. The score, however, will impact your finances negatively as your credit report will indicate to the lenders that you have a high risk of defaulting your debt. Therefore, creditors and lenders will often approve the above but with very high interest rates as compared to those with fair, good and excellent scores. Basically, a 645 FICO credit score is likely to cost you highly in the long run.
Improving your 645 credit score by 50 or 100 points
The journey towards achieving a positive rise in your credit score is usually a long one and may take quite some time to complete. It is therefore quite important that you brace yourself for a long way ahead and stay focused on this goal. However, this isn’t to alarm you as you’ll soon be able to reap the fruits of it. As your 645 credit score rises, you will progressively be able to get your loan requests approved and even qualify for credits on much better terms. Any negative information on your credit report will also be cleared by your local credit bureau with time and you’ll then be able to get that job you wanted or get that mortgage or even get an auto loan at lower interest rates.
But, your scores can also drop further, and this should be alarming. Therefore, you need to take caution. There are several contributory factors that could influence the drop.
One of the major factors is making late payments on your credit card or even defaulting to pay your auto loans, your mortgage and even your student loans. Usually, when one defaults, their local credit bureau adds negative information to their accounts. These comments include claims of bankruptcy, foreclosures, tax liens and civil judgements. This is a red flag to many lenders as it basically renders you not creditworthy and is used as an indication of financial irresponsibility. It is therefore imperative that you take the initiative to ensure that these comments are removed from your account and one sure way to do that is to make your payments on time.
An increase in your credit utilization could also play a role in the reduction of your scores. The application of new loans or credit cards You could also have recently applied for a new loan or credit card. Usually, when you apply for a loan, the financial institution will check your credit report. However, before they can check the records, they send you a request known as a “hard enquiry”. Accepting a hard inquiry will result in a drop in your scores. Basically, there are multiple factors that could make your credit score drop. A drop-in credit score will lower your chances of getting mortgages, getting your auto-loans approved or even get personal loans. Bottom line, you should work on raising your score to at least 650.
Different credit score groups
Credit scores are usually 3-digit numbers that range between 300-850. This range of scores is usually generated by credit score models. There are a variety of scoring models with FICO Scores being the most popular. Basically, creditors or lenders use your score determine whether you are credit worthy. The higher your score, the more creditworthy you are considered. The scores are grouped in ranges with scores above 750 being excellent while those between 700-749 are considered to have a good score. Scores of between 650-699 are considered fair while any score below 649 is considered to be poor.
|750 – 850||Excellent|
|700 – 749||Good|
|650 – 699||Fair|
|550 – 649||Poor|
|549 and below||Bad|
I know you must be wondering, how exactly are 645 credit score calculated? Credit scores are calculated from multiple factors which include:
Credit payment history: Your payment history is one of the most important factors considered when calculating your score. In fact, it makes for up to 35% of the entire score. It indicates how financially responsible you are by providing information on whether you maintain your payment schedule by clearing your loans on time. It shows how often you default, the payments you have defaulted and eventually how long after the due date you clear your debts. Individuals with good payment histories are awarded higher scores.
Amount Owed on Credit Cards and Loans: Your score will also depend on how much debt in credit cards and loans you owe. It constitutes 30% of your credit score. It is an indicator of the amount of debt you owe compared to the amount of credit available.
Duration of Your Credit History: Credit Scoring models usually generate a score depending on the duration of your credit history. Individuals with a longer history of good credit payment are accredited with scores higher than those who’ve have either made late payments or defaulted payments in the past. It constitutes 15% of your score.
The Types of Accounts You Have: This usually accounts for 10% of your credit score.
Recent Credit Activity: Practices such as the opening of new accounts, getting new credit cards and getting more loans usually affect your 645 credit score negatively and thus causing it to drop. Your recent activities could give an impression of financial trouble. This usually constitutes 10% of your credit score.
Dealing with negative information which impacts your 645 credit score
Negative information on your credit report such as a negative credit history can have a great impact on your 645 FICO score. Usually, accurate derogatory comments can remain on your credit report for a long period of time ranging from 5-7 years. It is important that you check if these blemishing comments are accurate. Should they be inaccurate, then you should consider reaching out to your local bureau and submitting your complaints so that they are removed. However, if the information is accurate, there are ways you could use to remove the negative information. You could request your credit bureau to remove them in exchange for some payment. This is known as pay-for-delete. Although not a popular practice, some creditors will agree to remove any negative comments you have on our report in exchange for at least 70% of your payment.
You could also send a goodwill letter to your credit bureau in which you request them to remove the negative information. Here are a few other tips on dealing with negative information in your account:
- You should desist from applying for new credit cards until your 645 credit score improves.
- Pay all any court judgment as per the guidelines provided by the court.
- Clear all your outstanding credit card balances on time.
However, it is important to note that clearing your overdue debts does not change the fact that you defaulted a pay in the past. As long as you pay all your outstanding debt, the negative information will impact your account less as time goes by. Slowly by slowly, you may start getting your loan requests approved even though they may not have the best terms. It is therefore important to pay off your old debts and reduce your balances. You could design a monthly budget that would help you allocate some funds to the various debts you owe.
What can a 645 credit score get you?
Getting credit cards for credit score under 645
The good news is that, with a 645 FICO credit score, you are still eligible for a credit card. However, your selection of credit cards is limited. You may be able to get a secured credit card that requires a security deposit. This card grants the credit card company authority to take you deposit should you default payments within the required time. Should you manage to get an in-secured card, then your credit limit will be incredibly low.
Even with poor credit scores, you can still get a personal loan. Although banks and credit unions may not approve your loan request with a score as low as 645, there are several online lenders who will. Most of these online lenders actually specialize in bad credit loans. These companies just like banks take into account your credit report history. However, they are more flexible and their requirements are not as tight as those of banks. Before you can take a loan from an online lender, it is important that you first visit your local credit union as some of them offer interest rates that are lower than online lenders.
Read more about getting personal loan with 645 credit score.
With a 645 credit score, you just might be lucky enough to land an auto-loan. Auto-loans are often
awarded to those with scores as low as 500. However, there’s a catch, with such low FICO score,
you are likely to incur extremely high interest rates typically ranging from 8-13%.
Read more about getting car loan with 645 credit score.
Getting mortgage with 645 credit score
This goes for mortgages as well. Although you might be able to get a mortgage, the interest rates are generally high compared to those with good, fair, and excellent sores.
Even with a poor credit score, you can still get a mortgage. This bad credit mortgage is referred to as a subprime mortgage and is offered to those with low credit ratings. Due to low credit scores, lenders will not offer you conventional mortgages because they’ll see you as having a larger than average risk of not fulfilling and delivering on your promise of paying back the debt in time. The lenders will charge you higher interest rates so as to compensate for the risk of you defaulting to pay in good time.
Credit scores from all 3 credit bureaus
There are several credit score models available hence your 645 credit score can vary depending on which type of credit bureau or business is asking for it.
One of the most widely used credit models is the FICO model (Fair Isaac Corporation). The classic FICO scoring model gives the consumers a range of between 300-850 with scores above 750 being considered excellent.
Another scoring model used by some lenders is the Vantage Score. This model is quite new and has only been in use since 2006 when it was created by Equifax, Experian and TransUnion as a competitive alternative to FICO.
Other scoring models include the Trans Risk model developed by data from TransUnion, the Experian’s National Equivalency Score and the CreditXpert Credit Score. All these credit scores are relatively important depending on which one a lender chooses to use. It is therefore up to you to ensure you clear all your debts in good time in order to achieve a perfect score.
How to improve your 645 credit score?
A bad credit score can really make life a lot harder for you. It is therefore important that you work towards, fixing your 645 FICO score. Before we can go through a few ways you can improve your score, you ought to know that there are no shortcuts to raising your credit score. It usually takes quite some time, resilience, and patience. Here are a few tips for improving your credit score:
Look at Your Credit Reports
This usually is the starting point of the journey towards improving your score. As you know by now, your credit report is what is used by creditors to calculate your score. People have found some accurate information on their reports in the past. It is therefore important that you take a good look at yours and verify if the information outlined in it is correct.
Setting Up Payment Reminder
Paying your credit on time is a major contributory factor when it comes to the calculation of your credit score. There are several ways to do this, you could enroll in automatic payments through your credit card. The lenders will have some payment automatically debited from your account. You could also subscribe to payment reminders by banks through their online portal if they have any.
Pay Off Your Debts
This is another sure way of improving your 645 credit score. One way to reduce the amount of debt you owe would be to pay any credit card or loan debts that you have then avoid creating new credit card accounts until you have sorted out your score issues. An effective tip on paying off your debts would be to clear off the high-interest debts first.