Your score falls within the score range, considered very poor, from 300 to 579. A FICO score of 560 is considerably below the average credit score.
Many lenders tend not to do business with borrowers whose scores fall into the very Poor category, because of the bad credit they have.
Applicants with credit card scores in this range may be required to pay extra fees or place deposits on their cards. Utility companies may also require them to place security deposits on equipment or service contracts.
How Your Credit Score Works
The credit score used by 91 of the 100 largest U.S. financial institutions is the FICO credit score, which is developed by the Fair Isaac Corporation.
The precise formula to calculate FICO credit scores is top secret and undisclosed to the public. However, FICO reveals to everyone that it looks at your credit reports and evaluates your credit history with the following outline:
- Payment History – 35%
- Credit Utilization – 30%
- Length of Credit History – 15%
- Number of New Accounts/Applications – 10%
- Mix of Credit Types – 10%
FICO credit scores range from 300 – 850. Anything under 560 is considered very bad while below 650 is bad.
A score of 650 is considered fair and will qualify you for some loans. A score of 700 – 750 is good and will be enough to get all but the best deals.
Your ability to pay on time, as well as how much debt you have compared to your credit limit make the biggest impact on your score.
If you keep your debt low (ideally below 30 percent of your total credit limit), pay on time every month, and don’t apply for new credit cards frequently, your score will be good.
What Does a Credit Score of 560 Mean?
Credit Score of 560: Car Loans
Buying a car with a credit score of 560 is possible, but you’re most likely going to have an extremely high interest rate.
People with bad credit – if approved for a loan – are always offered higher interest rates than someone with a credit score even 80 points higher than their score. What is the interest rate for a credit score of 560 on a car loan?
The average amount borrowed by car buyers is $27,000 – according to Melinda Zabritski, Experian’s senior director of automotive credit.
When you factor in the 3 common types of auto loans available in myFICO’s loan savings calculator – 36-month new auto loan, 48-month new auto loan, and a 60-month new auto loan – you’ll get a good idea of how much more an auto loan will cost for someone with a credit score of 560 versus a credit score of 640.
Let’s take a closer look:
|Loan Type||Credit Score||Rate||Payment||Added Cost|
|36-month new auto||640||9.309%||$862||$0|
|48-month new auto||640||9.331%||$676||$0|
|60-month new auto||640||9.401%||$566||$0|
So you’re telling me that an 80-point difference in credit scores results in a difference of $4,443—for the same car?
Yes, that’s exactly right. Getting a car loan with a credit score of 560 is going to cost you a lot more. On a 36-month new auto loan, it’ll cost you $2,551 more.
On a 48-month, $3,491 more. Also, on a 60-month auto loan, it will cost you a whopping $4,443 more.
In other words, if your score changed to a 640—just an 80-point improvement—you would save thousands of dollars on your loan. It’s worth it to pay a company like Contact Go Clean Credit to restore your credit before you take a test drive.
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Credit Score of 560: Credit Cards
What’s the best credit card for a score of 560? Unfortunately, if your credit score is 560, you will not qualify for an unsecured credit card.
In other words, you will have to make a deposit to open up a credit card.
Any credit score above 600 may qualify for an unsecured card – depending on the type of credit card you’re applying for. But if your credit score starts with a “5” and ends in two numbers (“60”), then you will only qualify for a secured credit card.
What’s a secured credit card? It means that you will be required to make a minimum deposit in order to open your credit card.
Go Clean Credit continually evaluates credit offerings and currently recommends these Secured Cards for people with a credit score of 560.
We have seen up to a 40-point increase in credit score just by opening one of these cards. What happens to your APR for a credit score of 560?
Here’s a chart illustrating the differences between annual fees and interest rates between someone with good credit and a credit score of 560.
|Card Type||Score||Rate||Balance||Added Cost|
|Standard||560 Credit Scores||16%||$5,000||$3,240|
Credit Score of 560: Home Loans
Let’s say you are a first-time homebuyer with a credit score of 560. Can a credit score of 560 buy a house?
For most mortgages, you need to be above a 620 credit score, but there are a few loans out there that go down to 560 for FHA.
However, other parameters get harder (life debt to income), so it makes it pretty hard to qualify below 620.
Let’s say that you may qualify for an FHA loan with a credit score of 560. As you’ll see in the charts below, a low FICO score increases the amount of money you will end up spending on a loan throughout the course of its life.
Note: The 30-year fixed jumbo home mortgage APRs are estimated based on the following assumptions. FICO scores between 620 and 850 (500 and 619) assume a Loan Amount of $300,000, 1.0 (0.0) Points, a Single Family – Owner Occupied Property Type, and 80% (60-80%) Loan-To-Value Ratio.
|Bad||560 Credit Scores||5.36%||$1,676||$68,040|
So, can a credit score of 560 get a mortgage? Maybe. But is it worth it?
Getting a mortgage with a credit score of 560 will add an extra $68,040 over the course of the loan than someone with a 721 credit score.
The interest rate for a credit score of 560 will increase the monthly mortgage payment by $79 more than someone with a score of 75 points higher, at a credit score of 635.
Improving your Credit with Secured Credit Cards
Outside of pay for delete agreements, the easiest way to improve your credit is to get a loan or credit card and to pay on time each and every month.
The difficult part of this method is getting a credit card provider to offer a card to you. The easiest way to get a credit card and start rebuilding your credit is to ask for a secured card.
A secured credit card is one where you deposit a small amount of money, generally $500 or less with the issuing company.
This amount is your credit limit and the deposited amount serves as collateral. If you miss a payment, the company will take the money you deposited to pay the bill.
Additionally, after six months to a couple of years, the card issuer will give your deposit back and your card will become unsecured.
Small banks that you already have a customer relationship with are more likely to agree to such a deal since there is little risk for them and it is a good way to earn your customer loyalty.
If your bank does not offer secured cards, national issuers like Capital One have some secured card offerings.
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