Is 552 a Good or Bad Credit Score?

FT Contributor
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If you’re struggling with your finances, or you’ve had problems paying your bills in the past, the result is likely to be a poor credit score.

When your score is 552, FICO classifies this as “Very Poor,” meaning lenders see you as a high risk. Your low score means it’s going to be hard to access credit, and you will pay more for what you borrow.

It doesn’t have to stay that way, though. By reviewing your credit report and understanding the reasons for your low score, you can take steps to improve your financial standing and earn points that move you toward a Very Good or Exceptional credit rating.

Why Your Credit Score Is 552

Every credit report is unique, so we cannot tell you exactly what is in yours that’s causing your low score. However, because everyone’s credit score is calculated using the same criteria, there are likely to be some general issues bringing down the number.

Payment History

Your payment history is the most important factor in calculating your credit score, accounting for 35% of the overall number; it’s likely that your 552 rating reflects missed payments. Missing just a payment or two can shave 50 points or more from your score, so if you have a spotty payment history, it’s going to reduce your score.

Not making payments on time isn’t the only habit that affects your payment history, either. Repossessions, foreclosures, collection accounts, accounts that have been charged off, and bankruptcy filings will also impact your payment history.

Even if the debt has been effectively canceled, such as in the case of bankruptcy, your credit report shows that you have not paid past debts as agreed, which is detrimental to your credit score.

Amount You Owe

Carrying high balances on your credit cards, as well as high balances on your loan accounts, also knocks down your credit score. Your credit utilization, or how much you owe in relation to your available credit, accounts for 30% of your overall score.

The standard advice for credit card usage to maintain a good score is to avoid using more than 30% of your available credit at any given time, but when you have a low score like 552, it’s best to use even less.

If your cards are all maxed out, or you’re consistently over the limit, lenders see this as a sign that you’re financially overextended, and therefore a bigger risk.

Length of Credit History

Lenders prefer to see a long history of responsibility with credit. The age of your accounts, which is calculated using the age of your oldest account, the age of your newest account, and the average age of all your accounts, comprise 15% of your overall score.

You may find that you have a score of 552 because you don’t have a long credit history, or because you have multiple accounts that were opened fairly recently.  

Credit Mix

Lenders also like to see that applicants have a variety of credit types in their name, including credit cards, loans, and mortgages. Demonstrating responsibility with different types of credit is a positive sign to lenders.

Your credit mix only accounts for 10% of your overall score, and it’s not a requirement to have all types of credit. However, it’s possible that your 552 score could be partially influenced by only having one or two types of credit.

Credit Inquiries

Every time you apply for any kind of credit, whether a loan or a new card, the credit check appears as a hard inquiry on your credit report and knocks a few points off your score. Hard inquiries come off of credit reports faster than other information, but if you apply for a number of accounts in a short period, your credit score can take a big hit.

What Can You Do With a 552 Credit Score?

Experian reports that about 62% of people with a Very Poor credit score will become seriously delinquent — meaning they fall 90 days or more behind on payments.

What this means for you is that lenders are likely to see you as a high risk, and it’s going to be more challenging for you to access credit, including credit cards and loans, outside of programs designed for consumers with bad credit.

Here’s what you can expect:

  • You are unlikely to be approved for most traditional credit cards, including rewards cards
    • You may be able to get a secured card, which requires a deposit, or a card with higher than average interest rates and fees.
  • It’s going to be challenging to get a mortgage.
    • You will not qualify for a traditional home loan, but it is possible that you could get a loan under certain government programs, including FHA or VA loans.
    • You’ll undergo scrutiny for income verification, and you’ll have to put down a larger down payment, usually between 10% and 20%.
    • You’ll also most likely have to purchase private mortgage insurance (PMI).
  • Expect to pay much more for a car.
    • Traditional dealer financing may be out of reach unless you are willing to make a large down payment and pay a high interest rate.
    • A credit score of 552 is adequate to buy a car at a “buy here, pay here” dealership or from a dealer specializing in loans for poor credit.
    • Again, though, expect to pay much higher interest rates and agree to more stringent terms, such as weekly payments.
  • You may have trouble securing an apartment or rental home. Some landlords will look beyond the credit score, but even if they base approval on other criteria, you may be asked to pay a larger deposit than someone with a higher score.
  • You may be required to pay a deposit for some utilities, such as cable, satellite, or cell phone service. The company may also ask for a deposit on equipment.
  • Insurance coverage will cost more. Insurance companies view a poor credit history as a sign of risk and will charge more for coverage.

Overall, your best bet is to work on improving your credit score before you try to get any loans or cards.

How to Improve a 552 Credit Score

Just because you have bad credit now doesn’t mean you always will. With patience and some hard work, you can raise your score by several hundred points.

One of the first things to do is get advice from a credit repair company. A reputable credit repair company can have negative and inaccurate items removed from your report, and provide guidance on what you can do to raise your score and get back on track financially.

In addition to credit repair, do the following to raise your score:

  • Make payments on time, every month, even if you can only afford the minimum. Consider setting up automatic payments so you are never late. Paying on time also prevents late charges that can drive up the balance further.
  • Pay down the balances on your existing accounts to reduce your utilization as much as possible. Avoid using credit cards unless absolutely necessary, and only when you can pay the entire new balance.
  • Do not close old accounts or accounts that have been paid off. Your oldest accounts are helping extend the length of your credit history and increasing your available credit, which reduces your utilization.
  • Pay old debts and collection accounts. A credit repair company may be able to handle this for you. You can most likely settle the account for a lower payment, and negotiate to have the information removed from your credit report.
  • Avoid applying for new credit unless absolutely necessary.
  • Be patient. Negative information like bankruptcies, liens, and judgments can remain on your credit report for up to 10 years. Eventually, they will fall off the report, and your score will go up if you have been responsible with credit during that time.

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