Credit scores range from 350-800. Individuals with credit scores on the higher end are considered less of a risk and thus more creditworthy than those with low FICO scores. As it is 144 points away from what is considered as a “Good” credit score, a 556 credit score would be considered as “bad” on the standard 300-to-850 scale. A 556 credit score is quite likely to negatively impact your life in many different areas. With a 556 credit score, you will likely be affected in the following areas:
- You will likely be denied opportunities with certain employers. There are several high quality and leadership positions within companies where a credit score measures the perceived quality of a job candidate.
- You are likely to have even the smallest loan requests declined
- You are likely to pay much more in interest rates than those with good and excellent credit scores.
- You are likely to be denied opportunities to receive store credit cards or card offerings with perks such as Zero Fee Balance Transfers, Frequent Flier Mile Programs and Low and Zero APR card offerings.
Check Your 556 Credit Score on Every Credit Bureau
You must not just check your credit score on a single occasion with only one credit bureau, like Experian. Make it a point to take advantage of the free annual credit report and credit monitoring offerings. The danger of doing this is that you will never detect it if there is an error. The credit bureaus are not infallible. They make mistakes on credit reporting and scoring all of the time, so take advantage of the Annual Free Credit report, and periodically check your credit report across all bureaus. Regularly checking your credit is a safe practice that will ensure you are given a valid credit rating.
**If you do not check your credit rating across all bureaus, the mistake of a bureau may negatively affect your situation, and this will not be good for you.
How Does a 556 Credit Score Affect Your Life?
While a credit score of 556 is considered poor, some of the following credit items are still available, just at extremely higher rates:
- Auto loans
- Subprime credit cards
- Subprime home loan
- Store credit cards
- Subprime signature personal loans
Again, your interest rates will be high, which will affect your cash flow, which affects your ability to pay your bills. With that in mind, most creditors and lenders will often approve individuals with a credit score of 556 but very high-interest rates compared to those with fair, good, and excellent scores. There is a good chance that a 556 FICO score will cost you high in the long run.
Can You Buy a Car with a 556 Credit Score?
Some subprime credit cards and subprime auto loans offer the best approval odds for someone with a 556 credit score. The credit score of a 556 is not low enough for some lenders to deny the risks presented by an individual with a subprime credit rating.
How is a 556 Credit Score Calculated?
There are a large number of factors that are used to calculate credit scores. Some of the factors include:
Credit Payment History
One of the most often utilized factors considered when calculating your score is your payment history. Payment history is responsible for up to 35% of your entire score. Payment history is an indicator of your financial responsibility. Your payment history shows your default rate, the payments you have defaulted, and how long it takes to repay your outstanding debt. When individuals have a good payment history, they are awarded higher scores.
Amount Owed on Revolving and Installment Debt
Your FICO score depends on the amount of debt in revolving and installment loans you owe. It constitutes about 30% of your total credit score. Your debt utilization score indicates the amount of debt you owe compared to the amount of credit available.
Length of Credit File
Credit Scoring models generate a score depending on length of your credit history. Individuals with a longer history of good credit payment are accredited with scores higher than those who have either made late payments or defaulted payments in the past. It constitutes 15% of your score.
The Types of Credit
This usually accounts for 10% of your credit score.
Recent Credit Activity
Several practices, such as opening new accounts, obtaining credit cards, and getting more loans, can negatively impact your 556 credit score and cause it to plummet. You may have been in financial trouble recently as a result of your recent activities. Credit scores are usually calculated using this.
Is 556 a Respectable Credit Score
Although credit score ranges vary depending on the scoring model, generally speaking, credit scores between 580 and 669 are considered fair. A credit score between 739 and 670 are considered good. Finally, when a person has a credit score between 740 to 799 is considered very good; and credit scores from 800 and above are considered excellent as excellent credit scores. If we were to utilize these criteria to determine if a score is respectable, then we could say that a 556 credit score is not a respectable credit score.
Can You Buy a House with a 556 Credit Score?
Subprime mortgages are offered to people with low credit scores and are called bad credit mortgages. If you have a low credit score, you will not be eligible for a conventional mortgage since lenders will see you as having a greater than average risk of not paying back the debt on time. Due to the risk of you failing to pay on time, lenders will charge you higher interest rates.
How to Improve a 556 Credit Score?
We can review a several ways that you can use to improve your FICO score. There is no shortcut to raising your credit score, and raising your FICO rating usually takes time, resilience, perseverance, and patience. Here are a few tips for improving your 556 credit score:
Review Your Credit Reports
Looking at your existing credit reports is usually the start of the journey towards improving your credit rating. Creditors use the credit report to calculate your FICO score. People have found some accurate information on their reports in the past. Therefore, you must check to see if the information outlined in yours is correct. Suppose you find inaccuracies on your credit report. In that case, you can either dispute them directly with the credit reporting agencies or consider hiring a credit repair company to assist you in removing the inaccuracies on your credit report.
Setup Payment Reminders
Speed of payment directly influences your credit score. How quickly you pay off your credit cards influences your credit score. If you have a credit card, you can enroll in automatic payments. Lenders will automatically deduct some payments from your account. In addition, you can subscribe to payment reminders through your bank’s online portal if it has one.
Get Your Debts Paid Off
This is another surefire way to improve a 556 credit score. One way to reduce the amount of debt you owe would be to pay any credit card or loan debts you have, then avoid creating new credit card accounts until you have sorted out your score issues. The most effective and efficient step, is that when paying off your debts would be to pay off the high-interest debts first.