Did you know that most people over the age of 50 have credit scores that are far above the national average? Your credit score is determined by a vast number of different factors. Some of these factors may increase your credit score while others may lower it.
Credit scores can also vary quite significantly with the lowest score being 300 and the highest being 850. But is 580 a good credit score? More than that, why is it important to have a good credit score in the first place?
Keep reading and learn more about the importance of having a good credit score and whether or not 580 is considered a good or bad score.
Is 580 a Good Credit Score?
Credit scores are more detailed than just being good or bad. There are actually several different ranges that your credit score may be. For example, the lowest range is known as the poor range.
This is when your credit score rests between 300 and 579. It is certainly not a good thing to have a poor credit score. If your score is this low, this means that you are not taking care of your finances in the slightest.
You may rarely pay back your debts, you may use too much of your available credit, or you may have recently done something to ruin your credit such as file for bankruptcy. Having a poor credit score is not good because it can make it difficult for you to do anything that involves your finances.
For example, suppose you would like to buy a new home but you can’t afford the house of your dreams. To make owning your favorite house possible, you will need to get a mortgage. However, with a poor credit score, no bank or any other lender will ever even consider giving you a mortgage or loan.
This is because a poor credit score shows that you are unreliable with your finances. If someone were to give you a mortgage, the lender would have no reason to believe that you would pay back what you owe. For that reason, most lenders won’t lend you anything in the first place.
As you can see from the range for a poor credit score, it stops right at 579. Your score of 580 is only one point above that range. 580 is actually in the “fair” range which is one step above the poor range.
The fair credit score range spans from 580 to 669. A fair credit score range is still not good. In fact, the “good” range is just above the fair range which is then followed by the “very good” and “exceptional” ranges.
While a fair credit score is better than a poor score, it is still not all that great to have. You will have an easier time opening certain bank accounts and perhaps even some credit cards, but for the most part, it will still be quite difficult to get loans and mortgages. It might even be a struggle to move into a new apartment.
A score of 580 is particularly bad. Even though it is considered a fair score, it is right on the border between fair and poor. This score could easily dip one point and leave your score significantly worse than before.
Because 580 is right on the border between these two ranges, it is certainly not a score that you would want to stick with. If you maintain this score, it will be a challenge to do important things in your life like get a nice credit card or buy a house. Fortunately, you don’t have to be stuck with this credit score forever.
There are certain things you can do that will help your credit score increase in no time. However, before you start trying to improve your credit score, you first need to understand how your credit score got so low in the first place.
What Is Making Your Credit Score Low?
Because 580 is right on the edge of becoming a poor credit score, you will have to be especially careful if you want to improve this number. However, improving such a credit score will take some time. You should expect it to jump up to a very good credit score overnight.
Instead, you will need to be patient as you work on your score. It may be difficult at first, especially if you have a lot of debt to deal with. The important thing to remember is that you need to work on one thing at a time.
The first thing you should focus on is any bills that you need to pay off. One of the reasons why your credit score may be low may have to do with how you’ve been paying off your debts. If you are often late when paying off the money you owe, this is a big reason why your credit score is only 580.
When you are late when paying off a bill, this will affect your credit score in one way or another. The first time you are late when paying a bill, not much will happen to your score. However, if you are always late when paying off your bills, this will seriously start to affect your score in a bad way.
If you are always late when paying off your bills, this will show that you are not very financially responsible. This will not only reflect in your credit score but lenders and banks will be able to see it as well. If you are not seen as reliable with your money, it makes sense that most banks and lenders won’t want to deal with you.
What You Need to Know
If you usually don’t pay off your debts on time, no one is going to think that the exception will be a mortgage or a large loan. The later you are when paying off your bills, the worse the consequences will be. For example, if you are only late a day or two, the consequences won’t be that severe.
On the other hand, if you’ve been skipping out on paying your debts for weeks at a time, this will hurt your credit score quite badly. While it might be difficult to pay your debts on time, it is important to do so if you want to see your credit score go up instead of down. If you have a hard time paying your bills on time, there are several factors you can try to make the process easier such as starting a budget.
However, keep in mind that it is more than just late bills that lower your credit score. Another factor you have to keep in mind involves your total credit usage.
What Else Can Negatively Affect Your Credit Score?
You might not know that your total available credit has a lot to do with your overall credit score. You might not even know how much available credit you have. If this is the case, it is important to find out right away.
Different lines of credit have different amounts of credit that are available to you. For example, a premium credit card might have $80,000 of credit available. On the other hand, a very basic credit card might only have a few thousand dollars available.
Premium credit cards can afford to dish out so much available credit because the people who are able to get these cards already have very good credit scores. So, credit card companies already know that these people will pay back whatever they happen to buy with their cards. Basic credit cards are more restricted because the people who get them tend to have lower credit scores and may not be as reliable when paying back what they owe.
Suppose that you have a credit card with an available credit limit of $10,000. Then, suppose that you buy several items so that you use up $7,500 of all of your available credit. This means that you have used 75% of your credit limit.
This is a terrible thing for your credit score. Many people don’t know that in order to keep their credit scores in good shape, they need to only ever use a small percentage of their available credit. If you are in the habit of maxing out your credit cards, you will end up with a bad credit score.
If you want to avoid a poor credit score and start building credit, you will need to cut back on how much you spend with your credit cards and, of course, make sure to pay off whatever you buy. Ideally, you should only ever use 35% of your available credit.
This may seem like a very small portion to use, and it is. However, by only using a small amount of your credit, you will show that you are responsible for the way you handle money. This will also be reflected in your credit score.
The less of your available credit you use, the better. Some people insist on only using 30% of their available credit or even less. This is not always necessary, but if you want your credit score to go up fast, then this might not be a bad idea.
The Best Ways to Improve Your Credit Score Fast
If you need to improve your credit score as fast as possible and don’t know what to do, hiring a credit repair service may be a good idea. A credit coach can help you better understand what is causing your credit score to go down and what you can do to make it increase as fast as possible. Besides getting a credit coach to help you, you will also want to take some responsibility yourself.
To start improving your credit score, you will want to pay off as much of your debt as possible. Having a lot of debt can be stressful and it can damage your credit score for years if you’re not careful. If you are having trouble paying off your debt, it will be in your best interest to try and organize your debt as best as you can.
Once you organize your debt, you can better decide which debts you should pay off first. It is often a good idea to pay off the largest debts first and then weed out the small ones later on. This way, you won’t have to keep paying off your largest debts year after year.
Besides paying off your debt, you will want to avoid applying to too many credit cards at once. Every time you apply for a credit card, your credit score will go down a little bit. Applying for only one credit card at a time won’t do much damage.
However, if you try to get several credit cards at once, this will be a big shock to your credit score and it will lower it quite a bit. This is certainly not something you want to deal with if your credit score is already quite low. If you have already applied for a credit card recently, you should wait a few months before you apply for another one.
This will give your credit score enough time to recuperate before you apply for another card.
Everything You Need to Know About Your Credit Score
Is 580 a good credit score, you might ask? 580 is technically a fair credit score but it is only one point away from being a poor credit score. For that reason, you should not be content with a credit score of 580 and you should try to raise it. That way, it will be much easier for you to get mortgages, loans, credit cards, and more.
To learn more about your credit score, contact us here.