How Low Can Your Credit Score Go?

MainStreet

We know many consumers damaged their credit score during the recession. A study released in July 2010 found that more U.S. credit scores are below 600 as of April 2010, a score that's considered subpar by FICO, the company responsible for our current credit model. It's funny to consider that a score of 600 doesn't seem far off from a perfect 850. Still, this got us thinking— just how low can a credit score actually go? Can it hit zero?

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Technically, the answer is no. You can score 300, which, according to FICO spokesperson Barry Paperno, is the credit model's equivalent to a zero.

"The distribution of FICO scores is between 300 and 850," Paperno says. "That's just the way the model is built. It's not built to deliver a zero."

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Fortunately for consumers, hitting rock bottom isn't easy to do.

Take Seattle resident Mark Mitchell Johnson. He watched his score steadily plummet after a series of poor investments led him to accumulate nearly $300,000 in debt back in 2007. But despite a foreclosure, debt management plan and ultimate bankruptcy, his score never reached the 300s.

"[It] hit a low of 471 from Experian," Johnson recalls. "I don't know what I could have done to get it any lower."

That answer is a bit more complicated. FICO tabulates credit scores using five criteria: your past payment practices (how well you pay your bills); your debt to credit ratio; the length of your credit history; the number of accounts you've opened and, finally, the type of accounts you've opened.

In order to receive a 300, you would have to a find a way to bottom out in each category. This means, as Paperno explains, you would need to open up a bunch of new credit cards, max them out almost immediately, file for bankruptcy the very next day and then head back out and apply for more credit cards.

You would also have to be relatively new to the credit industry, since a lengthy credit history, no matter how good or bad it is, will positively impact one criterion of the score. And you could only open one type of account, since having a variety on the books will also help your score. This may, incidentally, have been what spared Johnson's score since he had a mortgage, a federal loan and several credit card accounts on the books at the time of the 471, as opposed to a wallet full of Visas.

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The lesson, at least where your credit score is concerned, is time heals all wounds.

"If all these things happened five years ago, you could have a decent score," Paperno explains. "[It] could have improved."

This may explain why a 300 is even more mythical than the 850. Though FICO has told MainStreet the perfect score does indeed exist, Paperno says he's never come across someone with a 300.

Neither has John Ulzheimer, a former FICO employee who now works for SmartCredit.com. "The lowest score I've ever seen is a 376," he says.

FICO couldn't provide exact stats of what percentage of people fell into the lowest bracket possible, but did say the scores tend to be closer to 850 than 300. Paperno said the average median score, last recorded in 2009, was 711.

There is a caveat, however. While you may not be able to score a zero, or the model's equivalent, you can fail to qualify for a credit score. This happens primarily to the unbanked, since FICO requires that a person has opened and then used at least one account in the past six months before it provides the score.

FICO also requires that you're alive at the time of the request as a means of fraud protection, a tenement Ulzheimer said could result in a rejection for a legitimate (and living) person should they share a joint account with someone who is recently deceased.

Those without credit need not fret. Though credit may be hard to come by in our current economic climate, securing some won't drop you directly into FICO's bottom bracket. Credit newbies who play their cards right could actually end up in the higher eschelons.

"I've seen people go from having no score to having a good score," Paperno says.

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