When you think about credit scores, you probably picture a number on a scale that reflects your financial health. It’s easy to wonder, “Can you have a negative credit score?” or “What if my credit score is minus 1?”
These questions often arise when people are worried about the impact of financial missteps, like missed payments or high levels of debt. Here, we’ll answer those questions and demystify the concept of credit scores.
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Can credit scores go negative?
No, you cannot have a negative credit score. Credit scores are designed to measure your creditworthiness, but they do so within a specific range.
Credit scores are based on a standardized scoring system. These scores are calculated by analyzing your credit history, including factors like payment history, amounts owed, length of credit history, new credit, and types of credit used.
In the U.S., the most commonly used credit score model is the FICO score, which ranges from 300 to 850. So, even if you have very poor credit, your score would still be above zero.
What is the lowest credit score possible?
The worst score you can have is 300—not a negative number. So, if you’ve been wondering, “What if my credit score is minus 1?” rest assured; that’s impossible.
However, while 300 is technically the lowest score, most lenders would consider anything below 579 as poor credit. A score this low usually indicates severe financial distress, such as multiple missed payments, defaulted loans, or maxed-out credit cards.
What happens if you have negative credit?
While you can’t have a negative score, you can still experience what’s often referred to as “negative credit,” which simply means having a very low credit score. Negative credit can make it challenging to get approved for loans, credit cards, or even rental applications. If you do get approved, you’ll likely face higher interest rates and less favorable terms.
How to improve a low credit score: 5 tips
If your credit score is on the low end, improving it should be a priority. Here are five steps you can take:
1. Pay your bills on time
Payment history is the most significant factor in your credit score, so making sure you pay all your bills on time can have a big impact. Late payments or one missed payment can cause a noticeable drop in your score, so setting up automatic payments or reminders can help ensure that you never miss a due date.
2. Reduce your debt
High levels of debt can drag your score down. Focus on paying off credit cards and loans to lower your credit utilization ratio. A good rule of thumb is to keep your credit utilization below 30%, meaning you’re using less than 30% of your available credit.
This might help: How to Become Debt-Free: 7 Steps to Get There
3. Avoid opening new credit accounts
Only apply for new credit when necessary. Each time you apply for new credit, it results in a what’s called a hard inquiry, which can lower your score temporarily. It’s wise to manage the credit you already have responsibly before considering new accounts.
4. Check your credit report regularly
Errors in your credit report can hurt your score. By reviewing your report regularly, you can catch and dispute any inaccuracies. Correcting even small errors, like incorrect balances or late payments, can make a significant difference.
5. Consider a secured credit card
If you’re struggling to get approved for traditional credit cards, a secured card can help you rebuild your credit. With a secured card, you deposit money into an account that acts as collateral, and your activity is reported to the credit bureaus.
Over time, responsible use of a secured card can improve your credit score, and you may eventually qualify for an unsecured card with better terms.
Bottom line
While there is no way you can have a negative credit score, a very low score such as 300 to 579 can feel just as daunting. Understanding how credit scores work, and knowing that they can’t go negative, is the first step in managing your credit health.
Whether your score is currently low or you’re just looking to maintain a good score, the key is to take proactive steps like paying bills on time, reducing debt, and monitoring your credit report. With time and effort, you can improve your score and gain greater financial flexibility.