A 552 Credit Score Is Problematic
The glass half full mindset would point out that a 552 credit score is actually not the lowest of the range of possible scores according to some lenders. As shown above, a score in this range would be considered “Non Prime” by some auto loan providers. Credit Bureaus such as Experian categorize a 552 credit score as “Poor”. But setting aside the approach lenders take to categorizing scores, it is safe to say that all lenders will view a score this low as indicative of you being a riskier than average person to lend money to.
In fact, Experian states that consumers that have a 552 credit score have on average credit card debt of $4,674 which is a large amount in itself, but also suggests these consumers have relatively high credit card utilization rates. Similar research from Experian shows that consumers with a credit score in the 500-579 range have an average credit utilization ratio of 64%. This isn’t surprising at all and was discussed in our post on credit scores: the credit utilization ratio is a particularly important determinant of your credit score.
Why Should You Care About Your Credit Score?
Your credit score is easily one of the most important numbers in your life mainly because it determines your access to credit including credit cards, personal loans, and mortgages and, just as important, the terms and cost of credit. For this reason, it is important to monitor your credit frequently, to be proactive in resolving issues that arise that impact your credit score, and to ensure that you’re taking steps to steadily improve your credit score over time. While a 552 credit score is not ideal, it is also not the end of the story. In the following sections we discuss what this credit score means, explain what a good credit score is and share some practical tips to help improve your score.
What a 552 Credit Score Means For Your Options
Having a 552 credit score will impact your ability to borrow money at attractive rates and will also limit the the number of lenders willing to extend credit to you. In all likelihood your credit score is at this level because you either have a limited credit history, have had issues keeping up with your credit payments in the past and or have maintained a high credit utilization. This creates an unfortunate situation where on the one hand you need opportunities to demonstrate that you can be trusted with credit but in the event that you need new credit, getting approval will be difficult and likely very costly. Perversely costly financing can end up increasing the odds that you default, further lowering your credit scores. These are some of the implications of a 552 credit score:
Getting a Mortgage with a 552 Credit Score
It is almost impossible to get a mortgage with a 552 credit score. While lenders don’t usually advertise the minimum scores they accept, most traditional mortgage providers are very unlikely to approve applications unless the applicants have a score of at least 580. Even then, a 580 credit score will probably result to unfavorable terms such as a high mortgage rate. Statistically speaking, the overwhelming majority of mortgage applications that were approved in the United States in the last two years were for consumers that had credit scores of 620 or higher. So while it is possible to get a mortgage with a 552 credit score, the odds are significantly against you.
Getting Credit Cards with a 552 Credit Score
In short you will be able to get credit cards with a 552 credit score, but your options will be limited. As we pointed out earlier, data from Experian showed that consumers with credit scores in this category (300-579) had average credit utilization ratios of 64% in 2021, meaning that almost two thirds of the extended credit had been utilized. Therefore you can understand why some credit card companies would be wary about approving new credit cards to consumers with scores in this range. It is still possible to get a credit card with a score this low, but the number of options will be a lot lower and the rates charged will also be higher.
Getting a Personal Loan with a 552 Credit Score
It is possible to get access to personal loans, but this will be limited to non-traditional lenders such as Upstart and the rates offered will be relatively high – for example while Upstart offers loans amounts from $1,000 to $50,000 their interest rates can be as high as 35.99%. The average rate for a 5-year loan from Upstart has been 24.74% per the company. The point is that although these loans might be accessible even with a low credit score, the financing cost is certainly high. However, this is still superior to seeking out short-term loan options such as payday loans which carry even higher interest rates.
Getting an Auto Loan with a 552 Credit Score
It is possible to get access to automotive loans in the form of a loan or a lease with this credit score. Of course the rates offered will be higher. Experian estimated that in the fourth quarter of 2021 consumers with credit scores in the “Non Prime” category paid an interest rate (APR) that was on average 3.34% more than consumers with credit scores in the “Prime/Near” category. To use a more concrete example, the below shows the advertised auto loan rates by Potomac Federal Credit Union, a small credit union based in Maryland.
Two things to note. First is the letter grading – the credit union would consider a 552 credit score to be a “D” grade and it is also in the lowest category that they show and also right on the bottom of the range as well. This suggests that the credit union won’t approve auto loans to consumers below this level. Second, there is a dramatic decline in the rates this credit union charges for auto loans as you move from a “D” grade to a “C” grade. With a 552 credit score, this should be motivation to implement changes to help improve your score, as moving into the 600-649 credit score range could save you 50% or more in interest cost according to this credit union.
How to Improve From a 552 Credit Score
A 552 credit score is not a great score to have and so it’s important to start implementing strategies and habits that can help improve your credit score over time. The following are steps you can take:
1. Get Copies of Your Credit Reports
The first step we’d recommend would be to obtain a copy of your credit reports from each of the credit bureaus (Experian, TransUnion and Equifax) and review them thoroughly to first ensure that all the information on the reports is accurate. It is very important to understand what happened that resulted in your score falling to this level. Every consumer is entitled by law to a free copy of their credit report from each of the three credit bureaus once a year.
You can do this by visiting the Annual Free Credit Report. If you notice that there are irregularities on your credit report, you can act by sending a letter to the relevant credit reporting company disputing the information. Viewing your credit reports will also provide you with an idea of what has impacted your score in the past such as late payments and delinquent accounts. You can find more information about disputing information on your credit reports here:
2. Prioritize Paying Down Revolving Credit
You should prioritize reducing revolving debt such as credit cards which has two benefits. First, these types of accounts impact your credit utilization ratio which is an important determinant of your credit score. The second benefit is that credit debt is also more expensive than other forms of debt, so you save more by reducing it first.
3. Prioritize Paying Your Bills On-time
Not making your payments on your outstanding credit or making late payments is an easy way to impact your credit score. Your payment history is responsible for 35% of your credit score and so having a poor payment history is one of the common causes of low credit scores. A good practice that is easy to implement is to enroll in auto-pay for not just your credit repayments but other bills. Doing this at least helps you significantly lower the risk that you forget to make a payment and end up becoming delinquent.
4. Limit Opening New Accounts
One of the inputs the credit reporting agencies use in calculating your credit score is the length of your credit history. Therefore, each time you open a new account, the length of your history declines. The impact can be more significant if you open a large number of new accounts in a short period of time. This doesn’t mean that you should never open new accounts; rather, it is good practice to avoid opening multiple new accounts each year, especially if it’s just in the pursuit of rewards or cash bonuses.
5. Keep Credit Card Utilization Low
Another input the credit bureaus use in calculating your credit score is to look at the total amounts owed on revolving credit, such as credit cards, relative to the allowable limits on the credit cards. Keeping credit cards fully maxed out is not only financially imprudent but it has a negative impact on your overall credit score. Ideally, it is good practice to pay off your credit card balance each payment cycle. More practically, prioritize keeping your revolving credit well below the limits.
6. Take Advantage of Credit Building Tools
Having a 552 credit score limits your options for new loans but at the same time, you need opportunities to demonstrate to lenders that you are creditworthy. This is where credit building tools can be very valuable. These tools exist specifically to allow consumers with limited or poor credit histories to start rebuilding their credit.
A common tool is a secured credit card. These cards are offered by many banks, do not require a credit check for approval in most cases, and are an effective way of re-establishing credit worthiness. The Capital One Platinum Secured Card is one example of a credit card designed specifically for consumers looking to rebuild credit. The card has no annual fee, offers free credit score monitoring tools and offers automatic credit line reviews.
There are many other credit building tools available including the MoneyLion Credit Builder Plus product and the Chime Credit Builder tool. According to research conducted by each company, their consumers that used their credit building tools saw an increase in their credit scores of 30 points or more within a year. Of course this doesn’t mean that using their services will deliver the same results for you, but such an improvement could set you on your way to a 600 credit score in a relatively short period of time.
7. Monitor Your Credit Reports Closely
finally, it is a good idea to pay close attention to your credit scores. Checking your credit reports once a year should be the minimum frequency as while the information might not change every day, over the course of a year a lot can change. Monitoring your credit reports monthly (what we would recommend) allows you to keep track of the progress you’re making in improving your credit scores and enables you to be proactive in the event that an issue arises. There are a host of free credit monitoring tools including Credit Karma and Credit Wise.
It is Possible to Recover From a 552 Credit Score
Yes a 552 credit score is problematic not just in limiting your access to credit but also in terms of affordability as most of the credit options will be more expensive than normal. It’s never too late to start enacting changes. Employing these best practices, limiting new accounts and reducing debt will all contribute to your score recovering over time.