Is a 656 Credit Score Good? A Deep Dive

No, a 656 credit score is generally not considered “good.” It falls within the “fair” range, meaning it’s below the average credit score and might limit your access to the best interest rates and loan terms. Let’s explore what this means for you in detail.

Understanding the Credit Score Landscape

The term “good” is relative. What one person considers good, another might view as subpar, especially when it comes to financial health. In the credit score world, we’re generally talking about scores assessed using models like FICO and VantageScore, both of which range from 300 to 850. Let’s break down the typical scoring ranges:

• Exceptional (800-850): Elite territory. You’ll qualify for the best rates and terms across the board.
• Very Good (740-799): Still excellent. Lenders see you as a very low-risk borrower.
• Good (670-739): Above average. You’ll generally be approved for loans and credit cards, but rates might not be the absolute lowest.
• Fair (580-669): This is where a 656 resides. It signals to lenders that you might be a riskier borrower.
• Poor (300-579): Significant credit challenges. Securing loans and credit cards will be difficult.

A score of 656 places you squarely in the “fair” category. While it’s not a terrible score, it’s a signal to start actively working on improving your credit health.

What Does a 656 Credit Score Mean for You?

Having a 656 credit score impacts your financial life in several ways:

• Loan Interest Rates: Expect higher interest rates on loans, whether it’s a car loan, mortgage, or personal loan. Even a slight increase in the interest rate can cost you thousands of dollars over the life of the loan.
• Credit Card Approvals: You might still be approved for credit cards, but likely with higher interest rates and lower credit limits. You may also be limited to secured credit cards or cards designed for rebuilding credit.
• Insurance Premiums: In some states, insurance companies use credit scores to determine premiums. A lower score might result in higher insurance costs.
• Rental Applications: Landlords often check credit scores. A 656 could make it harder to secure an apartment in a competitive market or require you to pay a larger security deposit.
• Utility Services: Utility companies might require a deposit if your credit score is below a certain threshold.
• Employment: Some employers, particularly in the financial sector, might check credit scores as part of their background checks. While a 656 isn’t necessarily a disqualifier, it could be a factor in their decision.

Strategies for Improving Your Credit Score

The good news is that a 656 is a manageable starting point for credit repair. Here are some key strategies:

• Pay Bills on Time, Every Time: This is the most significant factor impacting your credit score. Set up reminders, automatic payments, or whatever it takes to ensure you never miss a due date.
• Reduce Credit Card Balances: Aim to keep your credit card balances below 30% of your credit limit. The lower, the better. Credit utilization has a major impact on your credit score.
• Check Your Credit Report for Errors: Obtain a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com. Dispute any errors you find.
• Avoid Opening Too Many New Accounts: Opening multiple new accounts in a short period can lower your average account age and potentially negatively impact your score.
• Become an Authorized User: If you have a trusted friend or family member with a credit card and a good payment history, ask them to add you as an authorized user. Their positive credit behavior can help improve your score.
• Consider a Secured Credit Card: If you have trouble getting approved for a traditional credit card, a secured credit card can be a good option. You’ll need to make a security deposit, which typically becomes your credit limit. Use the card responsibly and pay your bills on time to build credit.
• Patience is Key: Improving your credit score takes time and consistent effort. Don’t expect overnight results.

Frequently Asked Questions (FAQs)

1. How long will it take to improve my credit score from 656?

The timeline for improvement varies depending on your individual circumstances and the steps you take. Consistent positive behavior, such as paying bills on time and reducing credit card balances, can lead to noticeable improvements within a few months. More significant improvements might take 6-12 months or longer.

2. Will checking my credit score hurt it?

No, checking your own credit score is considered a “soft inquiry” and will not negatively impact your credit score. Lenders making inquiries to assess your creditworthiness are “hard inquiries,” and too many of these in a short period can lower your score slightly.

3. What is the difference between FICO and VantageScore?

Both are credit scoring models, but they use slightly different algorithms and data. FICO is the more widely used model by lenders. VantageScore is a newer model. Your score might differ slightly between the two.

4. What are the main factors that affect my credit score?

The key factors are: Payment history (35%), Amounts owed (30%), Length of credit history (15%), New credit (10%), and Credit mix (10%).

5. What is a good credit utilization ratio?

Aim for a credit utilization ratio of 30% or less. Ideally, keep it below 10% for optimal credit score improvement.

6. Can I get a mortgage with a 656 credit score?

Yes, it is possible to get a mortgage with a 656 credit score, especially with FHA loans, which have lower credit score requirements. However, you’ll likely face higher interest rates and might need a larger down payment.

7. What is a secured credit card, and how does it help?

A secured credit card requires you to make a security deposit, which serves as your credit limit. It’s a great option for those with limited or poor credit history to build or rebuild credit. Responsible use and timely payments are reported to the credit bureaus, helping to improve your score.

8. What should I do if I find errors on my credit report?

Immediately dispute the errors with the credit bureau that issued the report. Provide supporting documentation if possible. The credit bureau is required to investigate the dispute and correct any inaccuracies.

9. Can closing a credit card account improve my credit score?

Closing a credit card account can potentially lower your credit score, especially if it’s one of your oldest accounts or if it reduces your overall available credit. Carefully consider the potential impact before closing any accounts.

10. What is the difference between a credit report and a credit score?

A credit report is a detailed record of your credit history, including your payment history, credit accounts, and any negative information such as bankruptcies or collections. A credit score is a three-digit number that summarizes your creditworthiness based on the information in your credit report.

11. How often should I check my credit report?

It’s recommended to check your credit report at least once a year. You can obtain a free copy from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com. Regularly monitoring your credit report helps you identify any errors or fraudulent activity.

12. Can a 656 credit score affect my job prospects?

Potentially, yes. Some employers, particularly in finance or security-sensitive industries, may check credit scores as part of their background checks. While a 656 may not automatically disqualify you, it could be a factor in their decision-making process. It’s always best to be proactive about improving your credit score to avoid any potential negative impacts.