560 is generally considered a bad credit score. You’ll usually struggle to qualify for any form of credit that involves a credit check. If you do manage to get approval for an account, it will likely have a much higher interest rate than you’d prefer.
FICO Scores, the most popular credit scores, range from 300 to 850. The Fair Isaac Corporation (FICO) officially labels anything below 580 a poor credit score. The national average was 716 in 2021, which means 560 is much lower than most.
That said, you can still potentially qualify for some types of credit accounts with a 560 credit score. You can also increase your creditworthiness relatively quickly with the right strategy.
Let’s look at the odds of getting approval for some popular types of credit with a 560 credit score, then discuss what you can do to improve those odds over time.
Is 560 a Good Credit Score for a Mortgage?
Unfortunately, with a 560 credit score, most mortgage lenders won’t be interested in working with you. While the minimum credit score for a home loan varies depending on the lender and the type of loan, they all generally want a score higher than 560.
For example, here are some of the typical requirements for some popular types of mortgages:
- Conventional Loan: You usually need to have a credit score of at least 620 to qualify.
- VA Loan: The Department of Veterans Affairs (VA) doesn’t have any credit score requirements, but the lenders who provide their loans set their minimums between 580 and 620. These loans are only for people who meet specific military service requirements.
- USDA Loan: Like the VA loan, the United States Department of Agriculture (USDA) doesn’t set a minimum credit score, but the lenders who issue their loans generally want your score to be at least 640. You also need to live in a rural area and earn less than 115% of the local median.
Mortgage Rates by Credit Score
|FICO Score||APR||Monthly Payment||Total Interest Paid|
From the MyFICO Loan Savings Calculator for a 30-year fixed loan of a $430,000 home, 5/14/22
In this table above, you’ll notice that FICO won’t even state an interest rate for credit scores below 620!
With a 560 credit score, your best chance at getting a mortgage is probably with an FHA loan. A Federal Housing Administration (FHA) lender may give you a loan with a credit score as low as 500, as long as you’re able to put 10% down upfront.
If you can’t afford to put down 10%, you’ll usually have to have a credit score of 580 to qualify for an FHA loan. With some effort, you can probably get there within a few months.
If a mortgage lender does approve your application despite your bad credit, you’ll likely get the highest possible interest rate. Because mortgages have such high principal balances, consider waiting to apply until you have a better credit score.
Is 560 a Good Credit Score for an Auto Loan?
560 isn’t a good credit score for an auto loan. You can qualify for an auto loan with a 560 credit score, but your interest rate will be horrible. Auto loan principal balances may be lower than those of home loans, but their maximum interest rates are many times higher.
As a result, a low credit score can still cost you a shocking amount of money in unnecessary interest expenses.
Consider the following table of the average car loan rates at each credit score range:
Average Car Loan Rates By Credit Range
|FICO Score||APR||Monthly Payment||Total Interest Paid|
From the MyFICO Loan Savings Calculator for a 48-month new auto loan of a $30,000, 5/14/22
As you can see, there’s a massive discrepancy between the highest and the lowest possible interest rates on car loans. Here’s an example that puts the significance of that difference into perspective.
A credit score of 560 makes you a subprime borrower. In 2021, the average used car loan amount for subprime borrowers was $21,779. Assuming a five-year loan term and an interest rate of 15.91%, you’d pay a whopping $9,936 in interest.
If you could improve your credit score just enough to get into the next highest credit tier and reduce your interest rate to 9.77%, you’d only pay $5,838 in interest. That’s $4,098 in savings!
At that point, you’d still be well below the average credit score of 716. If you could get yourself up to average, you’d only pay $3,091 in interest and save yourself $6,845.
You might not be able to postpone your need for a car, but be well aware of the costs of having bad credit before you finance your next car purchase. If you can take the time to improve your score before you apply, it would be worth it.
Is 560 a Good Credit Score for a Credit Card?
560 is a not a good credit score for a credit card. The major credit card companies won’t approve your card applications. Any approvals that you do get will have high fees and interest rates. Fortunately, there are a few “bad credit” credit cards that you might get accepted for.
Mortgages and car loans aren’t accounts you should apply for with a bad credit score. You’ll almost always end up paying an uncomfortably high amount of interest, which can cause financial distress and lead to delinquencies or even default.
Fortunately, credit cards are different. You don’t ever have to pay interest on your balances if you pay them off each month. They also come in many more variations, some of which are specifically for people with bad credit.
As a result, a 560 credit score is less of an obstacle for getting a credit card than other types of financing. You still won’t qualify for the best credit card accounts, but you can at least get one or two.
Examples of “bad credit” credit cards include:
Another option is to apply for a secured credit card. They require a cash deposit as collateral, which often equals the available credit limit for the card.
That makes them much safer than an unsecured credit card for the credit card issuer and more accessible for borrowers with bad credit.
How To Improve a 560 Credit Score
Fortunately, bad credit doesn’t have to be permanent. No matter how much you damage your credit, you can always recover with discipline, patience, and a good strategy. If you need some help getting started, follow the steps below.
Use Our Credit Building Approved Vendors
Rebuilding your credit score can be a long journey, but it goes a lot faster when you get help from our favorite credit-building service providers. Here are the ones we recommend starting with:
- Credit Strong: Credit Strong offers the best credit builder loans. They’re a type of installment loan that uses the proceeds as collateral. Credit Strong’s loans are highly customizable, and they report your activity to each major credit bureau. There’s also no credit check and you can cancel at any time.
- BoomPay: Your rent payments typically don’t show up on your credit report, but you can pay to add them through rent reporting services. BoomPay is our favorite of the available options. They report previous and ongoing rent payments to all three credit bureaus for much lower fees than their competitors.
- Extra: It’s typically impossible to build credit with a debit card since they’re not credit accounts, but Extra offers a way around that. It’s a debit card that lets you build credit and accrue rewards like a credit card, but it connects to your bank account with no credit check.
- Experian Boost: Just as BoomPay reports your rent payments, Experian Boost lets you build credit with the bills for your phone, utilities, and streaming services. It also lets you access your Experian credit report and FICO score. Best of all, it’s completely free.
These options can significantly speed up your credit-building process. They’re also a great way to fill out a thin credit profile.
Maintain a Good Payment History
Payment history is worth 35% of your FICO score, making it the most significant factor in their scoring model. It’s worth as much as the length of your credit history, your credit mix, and new credit on your credit report put together.
Because of this, avoiding late payment at all costs is critical to improving your credit score. Even if you only miss a monthly payment on your credit card debt occasionally, it’ll be hard to build credit.
If you have multiple monthly payments to keep track of and worry that one might slip through the cracks, consider setting up automatic minimum monthly payments. It’ll protect your credit rating and reduce the likelihood of overdraft fees.
Decrease Your Credit Utilization
One of the primary ways that lenders gauge the health of your outstanding debt levels is through your credit utilization. In simple terms, that’s the ratio between the amount you owe on an account and its total borrowing limit. For example:
- A $4,000 credit card balance on an account with a $5,000 credit limit has an 80% credit utilization ratio.
- A $5,000 balance on a personal loan with a $10,000 principal amount equals a 50% credit utilization ratio.
Paying down your debts and reducing your credit utilization ratio for your revolving credit accounts and installment debts will benefit your score tremendously. Generally, the ideal credit utilization ratio is between 1% and 10%.
Start Now To Improve Your Credit History
Whatever strategies you use, improving your credit history is a marathon, not a sprint. In other words, it takes time to get an excellent credit score, and the sooner you start, the better.
The worst-case scenario is that you start looking for a house or a car, realize you have a lower credit score than you like, and then try to improve your situation.
Much like investing, the best time to start building your credit was yesterday. The second best time to start is today. Take action now to start improving your credit history.
Can I Get Approved With a 560 Credit Score?
Some lenders will approve you for certain types of credit with a 560 credit score. For example, you might be able to get an FHA home loan, an expensive auto loan, or a credit card for borrowers with bad credit.
However, you’ll have a much harder time qualifying for accounts than you would with a higher score. In addition, you’ll likely have much less attractive terms, such as a higher minimum down payment or interest rate.
In many cases, you’d be better off waiting to apply for significant credit accounts until you improve your credit score.
How Can I Raise My Credit Score Fast?
Raising your credit score generally isn’t something that you can rush. In fact, trying to improve your credit at the last minute before applying for a home loan or an auto loan can often backfire.
For example, if you take out a new credit account, you can add a hard inquiry to your credit report and increase your amounts owed.
That said, there are a few ways to make significant progress in a relatively short time. For example, you could:
• Report your rent, utilities, or streaming service payments.
• Become an authorized user on someone’s credit card.
• Request a credit limit increase to reduce your utilization ratio.
There can be a lot of value in these strategies, but they’re not a substitute for consistent, timely payments and sustained debt reduction.