Credit Score 664: Understanding Its Impact and How to Improve It

Your credit score is a three-digit number that plays a crucial role in your financial life. It reflects your creditworthiness, influencing your ability to secure loans, rent an apartment, and even get a job. A credit score of 664 falls within the "fair" range. This article provides a comprehensive guide to understanding what a 664 credit score means, its potential impact, and actionable steps you can take to improve it.

What Does a Credit Score of 664 Mean?

Credit scores are generally categorized into ranges that define your creditworthiness. The most commonly used scoring model is FICO, which ranges from 300 to 850. Here's a general breakdown of FICO score ranges:

• Exceptional: 800-850
• Very Good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 300-579

With a credit score of 664, you fall into the "fair" category. This means you're considered a moderate credit risk. While you may be approved for some loans and credit cards, you'll likely face higher interest rates and less favorable terms compared to individuals with good or excellent credit.

Understanding the Factors That Influence Your Credit Score

Several factors contribute to your credit score. Understanding these factors is crucial for improving your score. The key components are:

1. Payment History (35%): This is the most significant factor. Paying your bills on time, every time, is essential. Late payments, even by a few days, can negatively impact your score.
2. Amounts Owed (30%): This refers to the amount of debt you owe compared to your available credit. Keeping your credit utilization ratio (the amount of credit you're using divided by your total available credit) low is crucial. Ideally, aim for below 30%.
3. Length of Credit History (15%): A longer credit history generally leads to a higher score. This demonstrates a proven track record of managing credit responsibly.
4. Credit Mix (10%): Having a mix of different types of credit accounts (e.g., credit cards, installment loans, mortgages) can positively influence your score, as long as you manage them well.
5. New Credit (10%): Opening too many new credit accounts in a short period can lower your score. Credit inquiries, which occur when you apply for credit, can also have a minor impact.

The Impact of a 664 Credit Score

A credit score of 664 can have a significant impact on various aspects of your financial life. Here are some key areas where you might experience the effects:

Loan Approvals and Interest Rates

Securing loans with a 664 credit score can be challenging. You might be approved, but you'll likely face higher interest rates compared to someone with a higher score. This means you'll pay more over the life of the loan.

Mortgages: A higher interest rate on a mortgage can add up to tens of thousands of dollars over the loan term. You'll have higher monthly payments, making homeownership more expensive.

Auto Loans: Similar to mortgages, a higher interest rate on an auto loan will increase your monthly payments and the total cost of the car.

Personal Loans: Personal loans are often used for debt consolidation or unexpected expenses. With a 664 credit score, the interest rates on these loans can be significantly higher.

Credit Card Approvals and Terms

You may be approved for credit cards, but you'll likely be limited to cards with higher interest rates, lower credit limits, and fewer rewards or benefits. You might also need to settle for secured credit cards, which require a cash deposit as collateral.

Renting an Apartment

Landlords often check credit scores to assess the risk of renting to a potential tenant. A 664 credit score might make it more difficult to rent an apartment, and you might be required to pay a higher security deposit or find a cosigner.

Insurance Premiums

In some states, insurance companies use credit-based insurance scores to determine premiums for auto and homeowners insurance. A lower credit score can result in higher premiums.

Employment Opportunities

Some employers, particularly in the financial sector, may check credit reports as part of the hiring process. A 664 credit score might not disqualify you, but it could be a factor in their decision.

How to Improve Your Credit Score from 664

Improving your credit score takes time and discipline, but it's achievable with consistent effort. Here are some actionable strategies to help you boost your score:

1. Pay Your Bills on Time, Every Time

This is the single most important factor in your credit score. Set up automatic payments or reminders to ensure you never miss a due date. Even one late payment can negatively impact your score. Review your credit report to identify any past late payments and address them proactively. If you had a one-time issue that caused a late payment, consider writing a goodwill letter to the creditor explaining the situation and requesting that they remove the late payment from your credit report.

2. Reduce Your Credit Utilization Ratio

Keep your credit card balances low compared to your credit limits. Aim for a credit utilization ratio of below 30% on each card and overall. For example, if you have a credit card with a $1,000 limit, try to keep your balance below $300. You can achieve this by making multiple payments throughout the month or by requesting a credit limit increase (be careful not to spend more if you do this).

3. Review Your Credit Report Regularly

Obtain a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com. Review it carefully for any errors or inaccuracies, such as incorrect account information, unauthorized accounts, or mistaken late payments. Dispute any errors with the credit bureaus immediately. This is a crucial step in credit repair and can significantly improve your score.

4. Consider a Secured Credit Card

If you're having difficulty getting approved for a traditional credit card, a secured credit card can be a good option. These cards require a cash deposit as collateral, which typically becomes your credit limit. Use the card responsibly and pay your bills on time to build a positive credit history. After a period of responsible use (usually 6-12 months), some secured cards will allow you to graduate to an unsecured card and have your deposit returned.

5. Become an Authorized User on Someone Else's Credit Card

If you have a trusted friend or family member with a credit card in good standing, ask if they'll add you as an authorized user. Their positive payment history will be reported to your credit report, helping to improve your score. Make sure the cardholder reports to all three major credit bureaus.

6. Avoid Opening Too Many New Credit Accounts

Opening multiple new credit accounts in a short period can lower your score. Each application triggers a hard inquiry, which can temporarily ding your score. Focus on managing your existing credit accounts responsibly before applying for new ones.

7. Use Credit-Builder Loans

Credit-builder loans are designed to help people with limited or damaged credit history establish or improve their credit. These loans typically involve borrowing a small amount of money that's held in a secured account. You make regular payments on the loan, and the lender reports your payment history to the credit bureaus. Once you've repaid the loan, you receive the funds.

8. Address Outstanding Debt

Develop a plan to pay down outstanding debt, starting with the accounts with the highest interest rates. Consider strategies like the debt snowball method (paying off the smallest debts first for motivation) or the debt avalanche method (paying off the debts with the highest interest rates first to save money). Negotiate with creditors to reduce your interest rates or create a payment plan.

9. Be Patient and Persistent

Improving your credit score takes time and consistent effort. Don't get discouraged if you don't see results overnight. Stick to your plan, monitor your progress, and celebrate your successes along the way.

Common Mistakes to Avoid When Improving Your Credit Score

While working on improving your credit score, it's essential to avoid common pitfalls that can hinder your progress:

• Closing Old Credit Accounts: Closing old credit accounts, even if you're not using them, can reduce your overall available credit and negatively impact your credit utilization ratio. Unless there's a compelling reason to close an account (e.g., high annual fee), keep it open.
• Ignoring Credit Reports: Failing to regularly review your credit reports can prevent you from identifying and correcting errors that could be harming your score.
• Applying for Too Much Credit at Once: Applying for multiple credit cards or loans in a short period can trigger multiple hard inquiries and signal to lenders that you're a high-risk borrower.
• Using More Credit Than You Can Afford: Overspending and carrying high balances on your credit cards can lead to increased debt and a lower credit score.
• Ignoring Collection Accounts: Ignoring collection accounts will not make them disappear. In fact, they can stay on your credit report for up to seven years. Contact the collection agency to negotiate a payment plan or settlement. Sometimes, you can negotiate a "pay-for-delete" agreement, where the collection agency agrees to remove the account from your credit report once you've paid the debt.

Long-Term Strategies for Maintaining a Good Credit Score

Once you've improved your credit score, it's crucial to maintain good habits to ensure it stays healthy in the long run:

• Continue Paying Bills on Time: This is the foundation of a good credit score.
• Maintain Low Credit Utilization: Keep your credit card balances low.
• Monitor Your Credit Reports Regularly: Check for errors and signs of fraud.
• Avoid Unnecessary Debt: Be mindful of your spending and avoid accumulating debt you can't afford.
• Diversify Your Credit Mix: Maintain a mix of different types of credit accounts, such as credit cards, installment loans, and mortgages.