Is 584 a Bad Credit Score & How Can You Improve It?
Is your credit score 584? Understand its significance, what it means for your opportunities, and practical ways to enhance your financial future.
A credit score is a numerical representation that helps lenders evaluate an individual’s creditworthiness. This three-digit number shows how reliably financial obligations have been managed in the past. It plays a significant role in various financial aspects, influencing decisions from loan approvals to interest rates offered.
Understanding Credit Score Ranges
Credit scores are generally determined by models like FICO Score and VantageScore, both typically ranging from 300 to 850 points. A 584 credit score generally falls into the “poor” or “fair” credit categories, depending on the specific model used. For instance, a FICO score below 580 is often considered poor, while VantageScore may categorize scores below 601 as poor or very poor. Therefore, a 584 score is typically viewed as below average and may be considered “subprime” by lenders.
Factors Influencing Your Credit Score
Several components contribute to a credit score’s calculation. Payment history is the most significant factor, often accounting for approximately 35% of a FICO Score. It assesses whether bills and debt payments are made on time and consistently.
The amounts owed, or credit utilization, is another major factor, typically making up about 30% of a FICO Score. This evaluates the percentage of available credit being used; lower utilization is viewed more favorably. The length of credit history also impacts the score, usually contributing around 15% to a FICO Score. A longer history of responsible credit use is beneficial.
New credit inquiries, which occur when applying for new loans or credit cards, account for about 10% of the score. Opening multiple new accounts in a short period can temporarily lower a score. Finally, the credit mix, representing different types of credit accounts held (e.g., credit cards, installment loans), makes up the remaining 10%.
Implications of a Lower Credit Score
A credit score like 584 can lead to several financial challenges. Obtaining approval for new credit products, such as mortgages, auto loans, or credit cards, becomes more difficult as lenders view individuals with lower scores as higher risk. Even if approval is granted, terms are often less favorable, meaning significantly higher interest rates. This increased cost of borrowing can lead to much higher overall payments over the life of a loan.
Beyond traditional lending, a lower credit score can affect other areas. Landlords frequently check credit reports when evaluating rental applications, and a low score can result in denial or a requirement for a larger security deposit or a co-signer. Insurance premiums, particularly for auto and home insurance, may also be higher, as many insurers use credit-based insurance scores to assess risk. Utility companies might also require a deposit for service activation if a credit score is low, indicating potential financial instability.
Steps to Improve Your Credit Score
Improving a 584 credit score requires effort. Making all payments on time is important, as payment history carries the most weight in credit score calculations. Setting up automatic payments can help ensure bills are never missed. If a payment has been missed, getting current and staying current will positively impact the score over time.
Reducing credit utilization is another step, as this factor significantly influences scores. Aim to keep revolving credit balances, such as credit card debt, below 30% of the available credit limit, and ideally even lower, like 10%. This can be achieved by paying down existing balances or by requesting a credit limit increase on an existing account, provided spending habits remain responsible.
Regularly checking credit reports from all three major bureaus (Equifax, Experian, and TransUnion) helps identify and dispute any errors. Incorrect information, such as accounts that are not yours or inaccurate payment statuses, can negatively affect your score. The dispute process involves contacting both the credit bureau and the company that reported the information, providing supporting documentation.
Avoiding new credit applications is also advisable, as each hard inquiry can temporarily lower the score. Instead, focus on responsibly managing existing credit. Becoming an authorized user on a credit card account with a primary user who has excellent payment history and low utilization can also help build positive credit history, provided the issuer reports authorized user activity to the credit bureaus. This strategy can add positive payment history and help reduce your overall utilization rate.