Lenders categorize a 600 credit score as “fair,” which falls under the FICO score of 580-669. This isn’t bad. In fact, 17% of American consumers belong to this category today.
Having a FICO credit score of 600 means you can access loans, buy a car, and even qualify for a mortgage. The downside is you find it difficult to access loans. And you’re perhaps disadvantaged at getting jobs or getting insurance that checks credit.
While a 600 credit is lower than the average credit score for Americans (715 as of 2024), you can quickly improve on this within months. Simply pay your bills on time, avoid defaulting on your account, and get debt relief. Unfortunately, this is easier said than done.
That’s why debt management services (such as Solve Finance) are super helpful. Such services pump up your credit score by giving you credit-building products, helping you correct your credit report for inaccuracies, providing advice, and even putting their faith in you by making a loan you can use and show successful repayments on. Just remember to put it on automatically!
What Can You Do with a 600 Credit Score?
A 600 credit score may not be the best in the country, but it’s a stepping stone to a super-prime credit score status (720 and above). Here are some of the financial outcomes a 600 credit score can achieve.
1. Get a Credit Card (But with Limits)
A credit score of 600 attracts interest rates of about 16.62 percent on average. But this can go up to 30 percent, depending on the lender and what you’re borrowing for.
You can also get loans on unsecured cards but with limits as low as $300. Here, you’ll be attracting an APR (Annual Percentage Rate) of 20 percent or higher.
These are too high. However, a low utilization strategy can lower such interest rates within months. You simply have to keep your credit utilization ratio below 30 percent. For instance, if your card has a $1000 limit, don’t charge more than $300. This way, traditional credit scores and most lenders categorize you as less of a wild card spender.
You’ll also need to put down your balances early, close any unused cards, and use a debt consolidation loan to pay off your credit card balances.
Note: A debt consolidation loan is where you put your multiple debt accounts into one single debt. This simplifies your debt payment system, thereby creating an air-tight payment history, which is great for your credit score. And it also lowers your overall cost, which is great for your wallet!
2. Qualify for a Personal Loan (at a Higher Interest Rate)
Although most lenders may shy away from 600 credit score borrowers, you can still qualify for personal loans. Credit unions, online lenders, and peer-to-peer platforms are your go-to lenders. But, as expected, this comes with caveats - high APRs of about 18 to 35%.
You should also expect smaller loan amounts, which are typically capped at $10,000 (some even lower). Then, there are issues of short repayment periods and additional fees.
The best way to maneuver these downsides is to execute a strategic loan application. This involves shopping around for lenders who offer better rates. Don’t commit until you’ve read the fine print. [Solve Finance offers these loans and loves lending to fair credit borrowers]
If you own a car and have no outstanding debts on it, you can also opt for secured loans with better approval rates because they’re backed by collateral. Secured loans also have lower interest rates, as car loans are usually lower rates than unsecured personal loans.
Pro Tip: Don’t overcommit - only take out what you can comfortably repay.
3.Rent an Apartment (with Extra Hurdles)
It’s rare for landlords to accept 600 credit score applicants. When they do, they’ll either request larger security deposits or demand extra insurance, which is fair because they want to mitigate their risks.
You’ll need to lower expectations and be willing to accept rental houses that are less premium because they’re usually in high demand. Some landlords may request deposits that are three times the monthly rent. Of course, you can negotiate.
You can also find a guarantor or co-signer whose credit score is really great. Then, you’ll need to promise never to fall short on your rental payments. The solution is to demonstrate responsible financial behaviors, such as regularly reviewing your credit reports.
4. Buy a Car (But Expect a Bigger Down Payment)
You can get approved for a car loan. The not-so-good news? You'll be looking at interest rates that'll make your wallet wince - typically 10-15% APR, sometimes even higher.
This translates to larger monthly payments and significantly more paid-in interest over the loan's life. To put that in perspective, someone with good credit (700+) might snag a rate of around 5-6%.
Dealerships may demand you make larger down payments. Instead of 10% initial deposits, you’ll be required to pay at least 20%. You may get trapped in a debt cycle if you're not careful.
However, with a great debt consolidation strategy, you can become less financially delinquent in no time. All you have to do is:
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Make good use of a balance transfer credit card, which helps get rid of credit card debts with high interest rates. This can also reduce your credit utilization. To achieve this, shop around for the best credit card refinancing vs debt consolidation rates.
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Holding off buying a car until your credit score improves. Use public transport, carpool with friends, or keep your current ride. Also, save up for a larger down payment, which helps minimize the amount you’ll need to borrow.
5. Get a Mortgage (with Special Loan Programs)
While traditional mortgage loans require a minimum credit score of 620, it doesn’t mean you can’t buy a house with a 600 FICO credit score. For instance, the FHA (Federal Housing Administration) offers government-backed mortgages that are perfect for Americans with a score of 580-680.
They offer mortgages to borrowers with credit scores as low as 580, with a down payment of 3.5%. Therefore, a 600 credit score is very much an option for buying a home.
For example, let’s take the average price for a middle-class family in the U.S., which is $360,381, according to Yahoo Finance. The required down payment here will be $12,613, much more manageable than the traditional 20% of $72,076.
The only catch is you’ll probably pay for the house at higher insurance premiums.
The other reason why FHAs aren’t financially sound investments in the long term is the Limited Equity Building. Due to FHA’s ongoing insurance premiums, a larger portion of the monthly pay goes towards the insurance. This limits your ability to gain home equity. This means you may end up paying for the house for more than 30 years.
What’s the solution? Be patient for a few months as you boost your credit score. You’re only 20 points shy from the 620 minimum requirement. Even that small bump can save you thousands in interest rates.
Also, remember to pay your mortgages on time (put them on ACH if possible), address any errors on your credit reports, and embrace credit card debt consolidation.
How to Improve a 600 Credit Score
We’ve already touched on ways you can boost your 600 credit score. But here’s a rundown of the step-by-step procedures.
Lower Your Credit Utilization
This means how you use the credit availability your lender has given you. Keep the utilization ratio below 30%. For instance, if your credit card limit is $500, try very hard not to charge it past the 30% mark, which in this case is $150. And if you do, pay it off before the statement comes due. If you’re disciplined enough, your credit score will shoot up in no time.
Always, Always Pay Bills on Time
This can’t be stressed enough. Your bills should NEVER be late. Budget wisely and ACH (automating direct debits from your account) is your friend.
Always remember your payment history contributes about a third of your FICO score. One late payment can slash your credit score by 50+ points. Even when you’ve set up an automatic payment system, follow up with the report monthly.
It takes half an hour every month to confirm that the payments have been made. Call the creditor and ask them to remove the late mark if there's a late payment.
Don’t Open Too Many Accounts
Minimize the number of your credit accounts. Whenever you apply for a new credit account, the lender is required to do a hard inquiry. This is where they review your credit report, which is then recorded on your credit report.
Although the damage isn't that significant, a hard inquiry can lower your credit score by 5 to 10 points. With a 600 credit score, every point counts. If you need a new card, it’s best to go for pre-approved offers, which don’t impact your credit score.
Better yet, check out if debt consolidation (if you're keeping up with repayments) or debt relief (if you aren't keeping up) is an option for you. This is where a debt management professional helps you restructure your credit card. They might consolidate your multiple debts into one, accelerating debt reduction.
Settle or Negotiate Any Past-Due Accounts
Past charge-offs and collections can hurt your credit score. Therefore, pay them off or at least negotiate them down. You can offer the lender a lump-sum payment in exchange for having your account marked “paid in full” or deleted from your account entirely.
This is where debt management services come in handy. They’re professionals who specialize in folks with low credit scores. They’ll help analyze your credit report and identify financial facets that are good for your specific needs.
Debt managers are great at offering budgeting guidance, especially when understanding the various debt consolidation options. In addition, you won’t have to worry about credit card debt because they’ll handle everything.
Common Credit Score Mistakes to Avoid
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Don’t ever forget your bills. A great way to achieve this is through a debt consolidation loan. This simplifies your debt management by making one loan payment easier to track. Its fixed monthly payment is also perfect for budgeting. Also, always check for errors on your credit report.
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Keep the credit card usage shown on your monthly statements to a minimum - advisably below 30 percent. This shows how responsible you are with your credit card loans.
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Don’t apply for new accounts. This is a red flag for lenders, and it hurts your credit score. The only exception, which is more of a strategy, is when you’re applying for credit card refinancing. This will flag your credit because of the hard inquiry, which will cut a small chunk of the credit score - but for only about 5+ points. However, in the long run, this lowers your interest burden, minimizes credit utilization, and improves payment history.
Final Thoughts
Even though a 600 credit score isn’t “good” from the lenders’ perspective, it doesn’t mean you can’t get a loan, buy a car, or qualify for a mortgage. It only means you’ll have to incur high interest rates and have to go through more hurdles.
A 600 credit score is a stepping stone to a better financial future. Every payment made on time and every reduced credit balance are an inch closer to lower interest rates. Never write yourself off from getting a personal loan. Yes, banks and financial institutions are tough on “fair” (580-669) credit scores. But it doesn’t mean you’re stuck. A 600 credit score can do you wonders!
As we’ve illustrated in this article, all you need to do is pay your bills on time, lower your credit utilization, seek assistance on credit card refinancing vs debt consolidation, and always check for errors in your credit reports.
If you’d like any assistance, get started today to get help with our financial app and make your financial management easy.
FAQs
1. How long before my 600 credit score improves?
As long as you do nothing to drag it down (overcharging your credit card, late bill payments, applying for new accounts, etc.), expect to start seeing improvements in 30 to 60 days.
2. Can a 600 credit score get me a credit card?
Of course. But at the expense of lower credit limits and higher interest rates. Getting a secured credit card (with collateral) is a much better option.
3. Will paying off collections boost my 600 credit score?
It depends on the lender. While some remove the negative mark on your credit score report, others leave it on. That’s why you need experts like Solve Finance to help guide you through the process. It’s all about understanding which debts to pay off and how, for maximum credit score improvement.
4.What’s the fastest way to raise my 600 credit score?
Since payment history contributes 35% of your credit, debt consolidation is crucial. This simplifies and automates your loan payment process whilst lowering your interest rates.
Because credit utilization accounts for about 30% of your credit score, you shouldn’t overcharge your card. Ideally, only use about 10% of your credit card loan. And if you must use the card, perhaps for emergencies, don’t go beyond 30%.
Carry out a routine monthly checkup on your credit score report and remove any errors.
5. How does Solve Finance help improve credit scores?
The mission is to “make the best possible borrowing outcomes” for you. The company has a team of data scientists, finance experts (with PhDs), and engineers who enjoy helping people save money.
Solve Finance uses AI-driven insights to determine what’s hurting your credit score and then apply actionable steps to boost it. And all this is done without any hidden fees, unnecessary card offers, and no sales pitches.