While some credit savvy consumers are trying to uncover the secrets to getting the highest credit score, there are thousands of others who don’t even want to check their credit, for fear they will discover they have the lowest credit score. If that describes you, relax. It may not be as bad as you think.
“There is a relatively small number of consumers with the absolute or near to absolute lowest VantageScore credit scores,” says Jeff Richardson, spokesman for VantageScore Solutions.
Roughly six percent of the 200 million people in the U.S. with FICO scores fall into the low end of the range, with scores between 300-499, as of October 2012, says myFICO spokesperson Anthony Sprauve. And that number has been trending downward.
The lowest credit score isn’t a fixed number, since it depends on which credit scoring model is being used. For example, here is the lowest score for a number of popular models:
- FICO Score: 300
- VantageScore (1.0 and 2.0): 501
- VantageScore (3.0): 300
- PLUS Score: 330
- TransRisk Score: 100
- Equifax Credit Score: 280
- CreditXpert: 350
- CE Credit Score: 350
What kind of credit problems might cause someone’s score to sink to the bottom? Recent negative events, such as bankruptcy, tax liens, judgments, charge-offs, collection accounts, etc., are the most likely culprits. But don’t panic if you have one or two of these on your credit report. A few negative items alone shouldn’t result in a rock bottom score.
“To receive the lowest score, a consumer’s credit history would likely include a combination of behaviors highly predictive of a future default,” Richardson said.
No Place to Go But Up
On the positive side, however, once those events are behind you, you can start working toward a higher credit score. How long will it take to rebuild your credit? It depends on a lot of different factors, but consumers often see progress in a matter of months.
“So long as additional negative information isn’t added to your credit files, the negative impact of all of these events on your credit score diminishes with each passing month from the time the event occurred,” Richardson explained. “As time goes by, the event will have less and less impact until at some point it has no impact whatsoever, even though the timeframe for which the event remains in your file hasn’t ended. Typically after two years, most negative items have reduced impact on your credit score, however bankruptcies and public records have the biggest impact on your credit score, causing the largest drops and taking the longest recovery time.”
If you’re dealing with a very low credit score, here are a few things you’ll need to do:
- Get your free annual credit report and score. This step is the scary one. It’s like pulling off the bandages after a bad accident. It won’t be pretty, and it will hurt, but you have to find out where you stand and what's being reported.
- Stabilize your situation. If you have ongoing problems such as unpaid tax liens or judgments, or accounts you can’t pay on time, get help. You can’t begin to rebuild your credit if new, negative information keeps popping up on your credit reports.
- Pay everything on time going forward. Set up text or email alerts to notify you when payments are due. The most important thing you can do for your credit at this point is to stay squeaky clean going forward.
- Get a secured card. If you don’t have current, open accounts that are reporting a positive payment history, consider a secured credit card.
Eventually, you will be able to put your past problems behind you and hopefully even look forward to checking your credit score each month instead of dreading it.
“Someone can rise from an extremely low FICO Score over time,” said FICO's Sprauve. “It may take 7-10 years, but by practicing good credit management – paying all bills on time, keeping revolving credit balances low and only opening new credit when necessary – someone can steadily improve their FICO Score.”
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