A credit score of 654 is officially in the upper end of the “Fair” credit range of the FICO scoring model. This model consists of five different tiers, with Fair credit being the second-to-lowest ranking:
- Very Poor: 300 to 579.
- Fair: 580 to 669.
- Good: 670 to 739.
- Very Good: 740 to 799.
- Exceptional: 800 to 850.
If you have a score of 654, it’s a situation that you will want to ameliorate as soon as possible. Fortunately, you’re very close to the “Good” range. This means you can begin tapping into the benefits of good credit without too much effort.
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Why Your Credit Score Is 654
If you want to better understand how you got into the Fair credit range, you need to start by analyzing your past financial activity. Every credit score is unique to the individual who owns it. It represents a mixture of all of your good and bad borrowing behavior.
With that said, consider each of the following items. All of them can impact your score for better or for worse. How has each one hurt or helped your score thus far?
Payment History and Derogatory Marks
Your payment history is the most important factor of the FICO credit scoring model. It makes up over a third of your total score. Consider your past payment activity. Do you make payments consistently and on time? Do you regularly miss payments?
If you chronically miss payments, it can lead to a derogatory mark on your credit report due to:
- A missed payment on a credit account or a loan;
- A debt settlement or tax lien;
- A collection agency claim;
- Repossession of an item or foreclosure of a home;
- Bankruptcy.
If you have a derogatory mark, you should fix the reason for the mark as quickly as possible. Even when resolved, it can still linger on your report for seven years or more. Once resolved, send a goodwill adjustment letter to the lender asking if they will remove the mark.
As an additional note, you may also see a hard inquiry on your report. This can make your score drop slightly for up to a year. However, this simply shows that a lender checked your credit before giving you a loan. As long as you don’t have several hard inquiries in a row, it shouldn’t be a long-term issue.
Credit Utilization Ratio and Total Debt
The amount of money you owe on credit as well as your total debt also combine to make up nearly another third of your FICO score. This involves both your revolving and non-revolving credit.
Your credit utilization ratio shows what percentage of your revolving credit you’re currently using. If your accounts get to be over 30%, it can be an issue for your credit score.
Your total debt refers to your non-revolving credit — things like personal loans and mortgages. If you have too much collective debt of this nature, it will also hurt your score.
Credit Age and Mix
Two less important (though still impactful) factors are your credit age and mix. As a rule, the older the average age of your credit, the better it is for your score. If you open up a new line of credit, it will lower your credit age as well as your score.
The mixture of different credit options is also important. The more of a variety of loans and lines of credit you have, the higher your score can be.
What Can You Do With a 654 Credit Score?
With your score so close to the Good range, you may feel like you have decent credit. However, as long as your score is Fair, it will hamper your financial activity. For instance, with a score of 654, you may run into issues like:
- Being denied a loan or at least having to opt for a unique loan option set up for those with bad credit;
- Having to pay higher interest rates or get lower borrowing limits;
- Being denied housing or paying a higher security deposit after a landlord conducts a credit check;
- Missing out on employment opportunities after an employer does a credit check;
- Having to pay an annual fee, agree to higher interest rates, or miss out on benefits with your credit cards.
If you want to experience the savings and freedom of good credit, you have to find a way to boost your score at least into the Good range, and ideally much higher.
How to Improve a 654 Credit Score
With a Fair credit score, it’s imperative that you take action to repair your credit. As already mentioned, this shouldn’t be too hard when you’re already so close to a Good credit score of 670. Here are a few suggestions for ways to repair your credit and get your score to jump those critical 16 points and beyond:
- Review your credit report: Start by requesting a free copy of your credit report. Review it so that you can dispute any errors and address existing derogatory marks.
- Manage your credit: Do everything you can to pay down your existing non-revolving credit and avoid taking out unnecessary new loans.
- Also, continue to use your revolving credit (e.g. credit cards and home equity lines of credit) but make doubly sure to pay off the accounts every month.
- Stick to a budget: A personal budget is ground zero for healthy finances. Keep your budget updated and use it to live within and even below your means at all times.
- Make payments on time: Remember, your payment history is critical to credit success. Use autopay and set reminders to make all of your payments on time.
- Get professional help: You can also reach out to a qualified and reputable credit repair company. These can help you identify areas of financial weakness and create a plan to boost your score.
If you’re able to implement these tips, you can begin to establish fundamental financial habits. Given time, these will begin to influence your score positively, helping you crack into the Good range and, eventually, even taking you up into the “Very Good” and “Exceptional” ranges, as well.
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