Is 587 a Bad Credit Score? What It Means for You
Understand your 587 credit score: its impact on financial products and the key factors shaping your creditworthiness.
A credit score serves as a numerical representation of an individual’s creditworthiness, primarily indicating the likelihood of repaying borrowed funds. This three-digit number, typically ranging from 300 to 850, helps lenders and various other entities assess the financial risk associated with extending credit. A credit score of 587 falls within a specific category that carries particular implications for an individual’s financial opportunities.
Understanding Credit Score Ranges
Credit scores are categorized into ranges that help financial institutions understand a borrower’s risk profile. Common classifications include Excellent, Very Good, Good, Fair, and Poor. A score of 587 typically places an individual in the “Fair” credit range.
The “Fair” range usually spans from 580 to 669 for FICO scores, which are widely used by lenders. This indicates a credit profile below the average for consumers in the United States. It suggests a higher risk to lenders compared to those with higher scores.
Scores below 580 are considered “Poor,” signifying very high risk. A “Good” score typically starts around 670, extending up to 739. Higher ranges, such as “Very Good” (740-799) and “Excellent” (800-850), denote lower risk and greater financial stability.
Implications for Financial Products
A credit score of 587 carries distinct implications when seeking financial products. Lenders perceive individuals with scores in this range as higher-risk borrowers, affecting approval chances for personal loans, auto loans, and mortgages.
For personal loans, approval with a 587 score is possible, but terms are less favorable. This often translates to higher interest rates compared to those offered to borrowers with better credit scores. Lenders might also impose stricter conditions or require additional qualifications to mitigate perceived risk.
For auto loans, a “Fair” credit score typically results in significantly higher annual percentage rates (APRs). New car loan rates for “Fair” credit might range from 7% to 9%, while “Poor” credit could see rates exceeding 15%. This increased interest can add hundreds or thousands of dollars to the total cost of the vehicle.
Securing a mortgage with a 587 credit score is challenging, as many conventional lenders prefer a minimum score of 620 or higher. Government-backed loans, like FHA loans, might accept scores as low as 500 or 580 with specific down payment requirements, but interest rates will be considerably higher. A higher credit score correlates with lower mortgage rates, meaning a 587 score leads to less competitive terms and higher monthly payments.
Obtaining credit cards may be possible, but these often come with higher annual fees, less attractive interest rates, and possibly require a security deposit.
Key Elements of a Credit Score
Credit scores are calculated based on information in an individual’s credit report. Payment history is the most impactful factor, accounting for a significant portion of the score. Consistently making payments on time demonstrates reliability and financial responsibility.
Credit utilization, the amount of credit used compared to total available credit, is an influential factor. Keeping balances low relative to credit limits contributes positively. Length of credit history plays a role; a longer history of responsible credit management is beneficial.
The types of credit used, such as a mix of revolving and installment accounts, can also influence the score. New credit inquiries, from applying for new loans or credit lines, can temporarily affect a score. While these elements are considered, their precise weighting can vary depending on the specific scoring model used.