Low FICO Score Credit Risk

A low FICO (Fair Isaac Corp.) credit score can be a real problem when you want new credit. Because every lender will check with some credit bureau to discover what kind of credit score you have, a low score could cause you to be rejected quickly, or at least to have to pay high interest and pay back the loan quickly.

Significance

Low credit scores can affect several areas of your life, not just your ability to get credit. "A fair chunk of employers want to examine your credit history before offering you a position or a promotion. Blotches there--repossessions, collections, high credit card balances--could cost you the job you want," Liz Pulliam Weston wrote for MSN Money. Other things hampered by a low credit score include the abilities to get an apartment and good insurance rates.

Types

A credit score is determined by the things that are reported in it. It is always changing, and whether it goes up or down depends on how you handle your financial matters. Things that change it are the timeliness of payments (35 percent), how much debt you have (30 percent), how long you have had credit (15 percent), new credit (10 percent), miscellaneous (10 percent).

On a scale of about 300 to 850, a good credit score is considered to be above 700. A low credit score is anything below 600.

Effects

A low credit score can mean that you will not be able to get good terms on many kinds of credit. Although it will not mean that you cannot get credit at all, it does mean that people with better credit scores are paying lower interest rates.

Considerations

If you have a low credit score and don't know why, you might have problems with identity theft, or there could be serious errors on your credit report. Problems such as bankruptcies, liens, suits and wage attachments stay on your report for at least seven years, and bankruptcies stay there for 10 years.

A low credit score can be raised over time, but that will take consistency on your part. The best thing you can do, says MyFICO, is to make your payments on time and always for at least the minimum amount.

Warning

There are many agencies that claim to be able to fix your credit score. The Federal Trade Commission warns that they are usually scams. "These companies, commonly called credit clinics, don't do anything for consumers that consumers cannot do for themselves at little or no cost," according to the FTC. "Beware of any organization that offers to create a new identity and credit file for you."