Credit rating is a practice followed by lenders to ascertain the creditworthiness of a company or an individual. It mostly evaluates two things – one, what is the maximum amount of credit that can be given according to the actual income or income potential, and two, what is the likelihood of the loan being repaid as per schedule. Based on past records of loans availed, cheques bounced, delayed payments, foreclosure of loans, balance transfers, and a host of other indicators like income statements, tax returns, and balance sheets, the credit rating agency gives a credit rating score to the company or to the individual. If this credit score is not among the best, yet not among the lowest either, and falls more or less in the middle or upper middle range, then that score is said to be a fair credit score, and the person is said to have a fair credit.
The first thing that a person should do if he finds that his credit score has been downgraded from good to fair, is to check if there has been an error in reporting. He should double check that all large payments he has recently made have actually been reported, and also that there has been no double reporting of cheque bounces or overdue outstanding.
The person with a fair credit will find it slightly more difficult to get a loan or credit card to the extent he needs. He might also not be able to get the best interest rates that are offered to the top end clients with high credit scores.
The best way to improve a fair credit score is to maintain an impeccable payment record for as long as possible, and ensure that all your timely payments and foreclosures are correctly recorded by the credit rating agencies. If you have an improved financial condition in spite of not having a top notch credit score, then you could offer to pay increased margin money upfront to allow you to negotiate for a better interest rate. While applying for a loan you could get a co-applicant or guarantor a person who has a high credit score, which might let you get a better offer from the lender.
Do remember that a credit score is not a one time examination result, but an ongoing snapshot of your creditworthiness, so you should neither be discouraged nor become complacent with a fair credit score. So you should keep on making efforts to improve your score on an ongoing basis, and you can surely reach the top of the heap.