A 560 credit score can feel like a roadblock when you’re aiming for financial stability or trying to secure loans with better terms. While a 560 credit score is often considered subprime, meaning it falls below the average, it doesn’t mean you’re stuck there forever.
In fact, with the right strategies, you can turn things around, boost your score, and open up more financial opportunities. This post will explore what having a 560 credit score means, how it affects your financial life, and most importantly, how you can improve it.
What Does a 560 Credit Score Mean for You?
A credit score is a three-digit number that reflects your creditworthiness—in other words, it’s a measure of how reliable you are at repaying borrowed money. This score is calculated based on your credit history and financial behavior.
In Canada and the U.S., credit scores typically range from 300 to 900, with higher scores signaling better creditworthiness. Here’s what the numbers generally mean according to Equifax credit score ranges:
- 300-579: Poor Credit – This range indicates significant financial issues, such as missed payments or high debt levels.
- 580-669: Fair Credit – This range suggests some credit issues, though you may still be able to obtain credit, likely with higher interest rates.
- 670-739: Good Credit – This range reflects a solid credit history, and you are likely to be approved for credit with favorable terms.
- 740-799: Very Good Credit – This range demonstrates strong credit management, giving you access to the best credit offers and interest rates.
- 800-850: Excellent Credit – This range represents excellent credit management and typically results in the most favorable terms and rates.
A credit score of 560 is considered “poor” by most credit scoring models, including FICO and VantageScore. These models range from 300 to 850, with scores below 580 usually classified as poor. Essentially, a 560 credit score signals to lenders that you might be a higher risk when it comes to paying back loans or credit lines.
If you are trying to rent an apartment with a 560 credit score, and the landlord immediately looked concerned. That’s because a low score suggests you may have had late payments, high credit utilization, or even some negative marks like collections or charge-offs. This makes lenders, landlords, and even employers a little more hesitant to take a chance on you.
How Is Your Credit Score Calculated?
Did you know that about 4 in 10 Americans ‘have no idea’ how their credit score is determined?
Understanding how your credit score is calculated is essential for maintaining or improving it. Credit scores are derived from your credit report and rely on several key factors. Each of these factors contributes differently to your final score, making it vital to grasp their significance.
The main factors that influence your credit score include:
1. Payment History (35%)
This is the most significant factor. It includes your track record of paying bills on time, such as credit card bills, loans, and mortgages. Late payments, defaults, and bankruptcies negatively impact this component.
Example: If you’ve missed several payments on your credit card, it will show up on your credit report and can lower your score. On the other hand, a consistent history of on-time payments will boost your score.
2. Credit Utilization (30%)
This measures the percentage of your available credit that you’re currently using. It’s calculated by dividing your total credit card balances by your total credit limits. Ideally, you should use less than 30% of your available credit to maintain a healthy score.
Example: If you only have one credit card with a credit limit of $10,000 and carries a balance of $2,000, your credit utilization ratio is 20%, which is considered good. If your balance increases to $5,000, your ratio becomes 50%, which can negatively impact your score.
3. Length of Credit History (15%)
This factor considers how long you’ve had credit accounts. A well-established longer credit history generally indicates greater experience in managing credit and can positively affect your score and gives lenders more confidence that you’re a responsible borrower.
Example: If you’ve had a credit card for 10 years, it reflects a long history of credit management. Conversely, opening several new accounts in a short period can shorten your credit history and negatively impact your score.
4. Types of Credit Accounts (10%)
This component looks at the variety of credit accounts you have, such as credit cards, installment loans, and mortgages. A diverse mix of credit accounts can benefit your score.
Example: Having a combination of credit cards, a car loan, and a mortgage can be beneficial, as it demonstrates your ability to manage different types of credit.
5. Recent Credit Inquiries (10%)
This factor includes recent applications for new credit. Each application results in a hard inquiry, which can slightly lower your score. Multiple inquiries in a short period can have a more significant impact as lenders may see this as a sign of financial trouble.
Example: If you apply for several credit cards within a few months, each application can lead to a hard inquiry, potentially lowering your score temporarily.
How Does Your 560 Credit Score Affect Your Life?
1. Higher Interest Rates
When you apply for a car loan, the interest rate would be through the roof. With a 560 credit score, lenders see you as a higher risk, and they often charge you more in interest to offset that risk. This means any loan you qualify for—whether it’s a car loan, personal loan, or even a mortgage—will likely come with a hefty interest rate.
Over time, these higher rates can add up, costing you much more than if you had a higher credit score. It’s frustrating, but understanding this can motivate you to take steps to improve your score and secure better rates in the future.
2. Limited Credit Card Options
Forget about those flashy rewards cards you see on TV. With a 560 credit score, you’ll probably be limited to secured credit cards or those with higher fees and less appealing terms. Secured credit cards often require a deposit upfront, which becomes your credit limit.
Additionally, these cards may have annual fees or lower credit limits than standard cards, meaning you have to work within tighter constraints. While it’s not ideal, building your credit with a secured card can be a good first step toward qualifying for better credit card options.
3. Difficulty Renting or Getting Utilities:
A low credit score can affect your ability to rent an apartment or even get utilities set up in your name. Many landlords and property management companies check credit scores as part of the rental application process.
With a 560 credit score, they may see you as a potential risk, which could lead them to require a higher security deposit or even reject your application. Additionally, utility companies sometimes ask for a security deposit if you have a lower score, which means extra upfront costs just to get basic services like electricity and water.
4. Impact on Employment Opportunities:
Believe it or not, your credit score can also impact your job prospects, especially if you’re applying for roles that involve handling finances or sensitive information. Some employers, particularly in industries like finance, government, or banking, may request a credit check during the hiring process.
A low score could raise concerns about financial reliability and responsibility, potentially impacting your chances of landing the job. While this isn’t common for all types of jobs, it’s something to keep in mind if you’re in the job market or considering a career in a field where credit checks are standard practice.
5. Higher Insurance Premiums:
Many insurance companies use credit scores to help assess the likelihood of a customer filing a claim. A lower credit score, like 560, could signal a higher risk, which may lead insurers to charge you higher premiums for car or home insurance.
For example, if you’re applying for car insurance, your low credit score could translate into paying a higher monthly rate compared to someone with better credit. While this practice varies by region and provider, it’s an extra financial burden that could be eased by improving your score over time.
But even though a 560 credit score isn’t ideal, it’s not a life sentence. There are plenty of ways to improve your score, and I’ll share with you some strategies that worked for me and others.
How to Improve a 560 Credit Score?
Improving a 560 credit score takes time and consistent effort, but it’s entirely possible. The first step to improving your credit score is understanding how credit works. Once you know what affects your score, you can take the steps needed to get back on track.
1. Review Your Credit Report for Errors
One of the first things I did when I decided to take my credit seriously was to review my credit report. You’re entitled to a free credit report every year from all three major credit bureaus: Equifax, Experian, and TransUnion. Visit AnnualCreditReport.com to get yours.
Look over everything carefully. Are there any errors or incorrect accounts? In my case, I found an account that wasn’t even mine! Disputing and correcting that error gave my score an immediate boost. If you spot any errors, you can file a dispute with the credit bureau, and they’re required to investigate.
2. Start Paying Bills on Time
Payment history is one of the most significant factors in determining your credit score, accounting for 35% of your FICO score. I had a habit of paying my bills late, not because I didn’t have the money, but because I was unorganized. A few missed payments can really tank your score.
What helped me was setting up automatic payments for all my bills. There are also many apps that help track due dates and send reminders. Staying consistent with these payments over time can gradually improve your score.
3. Reduce Your Credit Card Balances
Credit utilization—the amount of available credit you’re using—accounts for 30% of your FICO score. The higher your balances are relative to your credit limits, the more it negatively affects your score.
When my score was sitting at 560, one of the biggest culprits was my maxed-out credit cards. I made a plan to pay down my balances aggressively, starting with the card that had the highest interest rate. Apps like Undebt.it or YNAB (You Need a Budget) can help you organize your debt repayment plan and track your progress.
Ideally, you want to keep your utilization under 30%, but the lower, the better. Paying down your credit card balances is one of the fastest ways to see a credit score improvement.
4. Open a Secured Credit Card
If your credit is too low to qualify for a traditional credit card, consider a secured credit card. With a secured card, you put down a deposit (usually equal to your credit limit), and then you use the card like a regular credit card. As long as you pay your bill on time every month, it can help you build positive credit history.
Capital One Guaranteed Secured Mastercard and Secured Neo Mastercard are two popular options that can help to rebuild your credit. Be sure to choose a secured card that reports to at least two credit bureaus for maximum impact on your score.
5. Negotiate and Settle Old Debts
If you have old debts in collections that were dragging your score down, consider negotiating with your creditors to settle these debts. You might be able to pay less than the full amount, and once the debt is settled, your credit report will reflect that.
If you have any unpaid collections, it’s worth calling the creditor to see if they’ll settle the debt for a smaller amount. You can even ask for a “pay for delete” or “pay for removal”, which means the creditor agrees to remove the negative mark from your credit report once the debt is paid. It doesn’t always work, but it’s worth a shot!
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6. Limit Hard Inquiries
Every time you apply for new credit, a lender performs a hard inquiry on your credit report, which can lower your score. During your rebuilding phase, try not to apply for any new credit unless it is absolutely necessary.
While one hard inquiry might only knock a few points off your score, multiple inquiries in a short period can have a cumulative effect. Be mindful of this if you’re in the process of rebuilding your credit score from 560.
7. Keep Your Old Accounts Open
The length of your credit history makes up 15% of your credit score. I made the mistake of closing my first credit card, thinking it would help, but it actually did the opposite.
Closing older accounts can shorten your credit history, reduce your total credit limit, and increase your credit utilization percentage—all of which can hurt your score.
If you have older accounts that are in good standing, keep them open even if you don’t use them often. It helps show a long, positive credit history, which lenders like to see.
8. Apply to Become an Authorized User on Someone else’s Credit Card
Becoming an authorized user on someone else’s credit card can be a powerful way to boost your credit score, especially if you’re working with a lower score like 560. As an authorized user, you gain access to the cardholder’s account and can benefit from their positive credit habits without being legally responsible for the debt.
The main advantage? You benefit from their strong credit profile—if the cardholder has a high credit score, a history of on-time payments, and low credit utilization, these habits can reflect positively on your credit report, potentially raising your score.
It’s also wise to discuss with the primary cardholder how they manage their payments and balances to ensure you’re on the same page. While you’re not liable for the debt as an authorized user, any negative actions—like late payments—could still impact your credit score.
Done right, this strategy is a relatively low-effort way to improve your credit score and can help you access better financial opportunities over time.
How Long Does It Take to Improve Your Credit Score?
Improving your credit score doesn’t happen overnight. It takes time for positive changes—like paying off debt or consistently paying bills on time—to reflect in your score. Generally, you’ll see small improvements within a few months, but significant changes can take six months to a year.
The key is patience and consistency. By adopting good credit habits and sticking to them, your credit score will gradually improve.
Final Thoughts
Improving a 560 credit score may seem like a long road, but with patience, commitment, and the right strategies, you can absolutely make it happen. Every positive step you take—whether it’s paying bills on time, reducing credit card balances, or addressing errors on your credit report—helps you rebuild your financial foundation.
While it can be challenging to stay motivated, remember that each small change you make brings you closer to a higher score and better financial opportunities, including better loan terms, greater financial flexibility, and increased peace of mind.
