The absolute worst credit score
It's really difficult to earn the worst possible FICO score, requiring a perfect storm of bad luck and bad decisions.
You've probably read about those overachievers whose goal is to have an 850 FICO credit score -- a feat that's very difficult. Only about 1 million Americans have the so-called "perfect" score.
Most people inhabit the 600-800 range, with the median FICO score being 723. About one in four have credit scores below the 600 mark.
Congrats to the 850 score folks. But what about the other absolute end of the scale? What does it take to bottom out at 300, the lowest possible FICO score you can have? Does anyone really have a credit score that bad?
Case in point: One guy we know bounced checks and let credit card accounts linger unpaid for months at a time and still came in with a credit score in the low 600s (or so he said) -- high enough to score a new-car loan, although with a high interest rate.
So, what does it take? According to MainStreet, you have to screw up in each and every one of the five criteria FICO uses to calculate your scores: payment history, how much you owe, length of your credit history, new credit you've applied for, and types of credit you've used, like mortages, car loans and credit cards. (Go ahead. Estimate your credit score for free.)
Jeanine Skowronski of MainStreet wrote:
In order to receive a 300, you would have to a find a way to bottom out in each category. This means, as (FICO spokesman Barry) Paperno explains, you would need to open up a bunch of new credit cards, max them out almost immediately, file for bankruptcy the very next day and then head back out and apply for more credit cards.
You'd also need a very brief credit history, she says, and only one type of loan -- say, just credit cards but no house or car loans.
Thus, very few have hit rock bottom. Bankrate offered this breakdown of FICO credit scores in 2006, the most recent year we could find:
- 300-499 -- 2% of the population.
- 500-549 -- 5%.
- 550-599 -- 8%.
- 600-649 --12%.
- 650-699 -- 15%.
- 700-749 -- 18%.
- 750-799 -- 27%.
- Over 800 -- 13%.
Of course, there are people who have no credit score. However, based on FICO's website, the bar for qualifying seems pretty low:
For your three FICO scores to be calculated, each of your three credit reports must contain at least one account which has been open for at least six months. In addition, each report must contain at least one account that has been updated in the past six months. This ensures that there is enough information -- and enough recent information -- in your report on which to base a FICO score on each report.
Why do you want a good to excellent FICO credit score? FICO scores from the three major credit bureaus -- Experian, Equifax and TransUnion -- are the most widely used by banks and other lenders when they decide whether to make you a loan and what the interest rate will be. (Another myFICO page shows interest rates you can expect on a variety of loans if your score falls within 620 and 850.)
Your scores also can affect insurance rates, and how you're perceived by landlords, utility companies and potential employers. Post continues after video.
Despite their importance, a new Visa survey shows widespread confusion about what's used to calculate your scores. Contrary to what people think, "FICO scores do not include factors such as age, national origin, gender, race, religion, education level, or marital status," Visa said in a press release.
(However, economic conditions where you live could impact your personal finances, which in turn could affect your scores. For instance, a new analysis by Experian based on the VantageScore (a range of 501 to 990) showed that Las Vegas and Bakersfield, Calif., -- both hard hit by the housing collapse -- are among the cities with the lowest average scores. The national average VantageScore is 749, USA Today says.)
What should be clear is that having a very poor score closes doors to you. For example:
- "Typically, lenders won't extend credit to a consumer with a poor credit score" or if they do, the interest rates could be prohibitive, the Credit Karma Blog says. "The good news is it's easier for poor credit consumers to improve their credit scores than those with higher credit scores, so each positive action you take will have big benefits." (See: "Money disaster? Fix your credit now.")
- Below 500, you can't qualify for an FHA-insured mortgage.
- With a 400 credit score, says CarsDirect.com, "it isn't possible to buy a new car, and sometimes even in the used car category you have to compromise on the kind of car you want."
- You can apply for credit cards designed for people with poor credit, but watch out for high rates and fees. Try a secured credit card, which requires you to deposit money as collateral. Managed responsibly, it will help you build your credit scores.
Having the lowest possible score could also subject you to ridicule, if others find out. A post by "TheNewWorldMan" at a myFICO forum several years ago had this to say about the lowest credit scores:
Terrible (below 479) (maroon) (rank: leper)
Your FICO sucks. You must have worked hard to get such lousy credit. Have you ever paid anything on time? Your luck is beyond bad. If you entered into a bet involving a coin toss, and were guaranteed five times your original stake for heads or tails, the coin would land on edge and stay there.
More on MSN.com:
refund anticipation loans from tax preparers are LOANS and should be reported as such!
"In order to receive a 300, you would have to a find a way to bottom out in each category. This means, as (FICO spokesman Barry) Paperno explains, you would need to open up a bunch of new credit cards, max them out almost immediately, file for bankruptcy the very next day and then head back out and apply for more credit cards. "
I know a good plan when I see one!
I agree with Smeado. I thought this was going to be a profile of people with horribly low scores and how they got there, but maybe not using their real names. Either that, or someone who intentionally tried to get the lowest credit score possible as a blog project or something.
There must be a lot of bankers reading these comments because I am seeing a lot of thumbs-down votes on people who are making negative (i.e., honest) comments about banks. Touched a nerve, there, eh?
The banks and the credxit mongers have duped us long enough! Don't you think? Get all the Congressmen over 65yrs out of Congress and Don;t Pay them nothing for screwing the Public . We the people are Speaking.
FYI: Directly across from the White House in D.C. sits a MASSIVE Bank of America! Coincidence, I think not. Who's got their hands in who's pockets?
Not my pockets, they're empty!
What the hell are we supposed to do if the crooks are the ones making law?
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
ABOUT SMART SPENDING
Editor Bev O'Shea lives and works in the foothills of the Appalachians. A former copy editor for The Atlanta Journal-Constitution and the Orlando Sentinel, she joined MSN Money in 2007. She's a fan of sunsets, college football and free shipping, among other things.
Having worked as a writer, reporter and editor for more than 25 years, Editor Julie Tilsner is the sort of person who can't help but correct grammar in Facebook postings and on billboards. She's written for BusinessWeek, the Los Angeles Times, Parenting, Redbook, AOL and others. She lives in Los Angeles County with her family and loves to drink wine and practice yoga, although not generally at the same time.
A writer for MSN Money since January 2007, Donna Freedman won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. She also writes about smart money tactics for magazines and on her own site, Surviving and Thriving.
Mitch Lipka has been warning people about scams and shining light on questionable business practices for more than 20 years. Mitch, the consumer columnist for The Boston Globe, has also been a reporter and editor at The Philadelphia Inquirer, Consumer Reports, South Florida Sun-Sentinel and AOL. He won the 2010 New York Press Club award for best consumer reporting online and was honored in 2011 for his reporting on child product safety.
Marilyn Lewis is an award-winning writer with a passion for getting readers clear, straight information that helps them stay out of financial trouble. A former reporter for The San Jose Mercury News, she works from her home in Port Townsend, Wash. Contact her at MarilynLewis@Outlook.com.
LATEST BLOG POSTS
Children from lower income families are at greater risk of suffering accidental injuries and being sickened by food, according to a Consumer Federation of America study.