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What Exactly is “Fair” Credit?

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A lot is made of the extremes of the credit scoring spectrum. What does it mean to have bad credit? How can you get good credit?

But not a lot of attention is paid to those in the middle, who have fair credit. Consequently, that might leave many consumers wondering exactly how they got into their current position and what they can do to improve it.

In general, there’s no real set definition for what exactly constitutes a “fair” credit score. Typically, it’s the result of a number of factors that aren’t necessarily bad, but just aren’t good either. For example, one of the most common reasons a consumer will have a fair credit score is that they simply carry too much debt.

The percentage of your total credit limits for all accounts that you use at any one time make up 30 percent of your total rating, so the more debt you have, the lower that aspect of your score will be. Experts generally say that carrying more than 35 percent of your limit will cause your rating to take a bit of a hit, and the more debt you have, the lower your score will be. To make sure you’re maxing out this aspect of your rating, you should carry balances totaling less than 20 percent of your credit limits.

Another reason your score may be lower than you want it to be is that you may have missed a payment in the past. Payment history is the single largest factor in determining your credit rating, and even if you missed one due date by a single day, your score may take a sizeable hit. But the only way to remediate this aspect of your score is to simply keep making all your payments on time and in full so that the mistake is repaired over time. There’s no quick fix here.

One other reason your credit score might only be fair is if you have a limited credit history. Whether you just started borrowing within the last year, or only have one or two different lines of credit in your name, you might need to simply keep borrowing a little while longer.

The best way to build a good credit score is to just use common sense: make all your payments and don’t borrow more than you can afford to pay back in a month or two.

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