You’ve just learned you have a 580 credit score. Do you know what that means? Is a 580 credit score good or bad, or somewhere in between? What can you expect from lenders with a 580 credit score? Let’s take a closer look at this particular score.
So, you’re at a 580 credit score – what now?
For the purpose of this article, we’re going to look at the FICO Score model for credit scores, since it is the most widely used and known model. FICO Scores are three-digit scores that fall somewhere between 300 and 850 — and the higher your score is, the better your credit is. On the FICO scale, 580 is considered to be Fair credit, but there are plenty of lenders who will extend credit to people with scores in this range. Consumers with this credit score can, however, be considered poor borrowers, and may be subject to higher interest rates or less than ideal terms for loans and/or credit cards.
Here’s a breakdown of where some of our members stand when it comes to their credit scores:
Comparing Credit Score Ranges of Credit Sesame Members
| Score Range | Value Range | Members |
|---|---|---|
| Excellent Credit Score | 800 & Above | 19% |
| Very Good Credit Score | 740 - 799 | 19% |
| Good Credit Score | 670 - 739 | 17% |
| Fair Credit Score | 580 - 669 | 21% |
| Poor Credit Score | 579 & Below | 24% |
Source: Credit scores were calculated from 5,000 Credit Sesame members on 2/6/18.
If your credit score isn’t where you want it to be, don’t fret — there are steps that you can take to help build and improve your credit. But before you can know how to improve your score, you need to first understand the individual factors that contribute to your score.
Factors in your credit score
In order to fully understand your credit score, let’s take a closer look at what goes into building your score.
- Payment History. Your payment history accounts for 35 percent of your total score, making it the single most important factor. The best thing you can do for your credit score is to make at least your minimum payment due on time each month — every month.
- Credit Utilization. Your credit utilization isn’t far behind your payment history when it comes to weight. Accounting for 30 percent of your credit score, your credit utilization can most simply be thought of as the total debt you owe compared to your total credit limit. You should aim to keep this number below 30 percent. The best credit scores have a credit utilization between 1 and 10 percent.
- Credit Age. Another factor in your credit score is the length or age of your credit history. This accounts for 15 percent of your score. Some lenders want to see the age of your oldest account; others want to see an average age of all of your open accounts. Either way, be sure to keep your oldest accounts open and in good standing.
- Different Types of Credit. Lenders want to see different types of credit on your credit report to demonstrate responsible behavior with different types of credit. While this may sound intimidating, there’s a good chance you already have different types of credit on your credit report — for instance, consumer credit cards, auto loans, or a student loan are different types of accounts. Different types of credit account for 10 percent of your Credit Score.
- Number of Inquiries. Rounding out the last 10 percent of your score, the number of hard inquiries on your credit report can cause your score to drop slightly. While checking your credit yourself (a soft inquiry) won’t hurt your score, hard inquiries (such as when you apply for a new credit card) will — so limit the number of new accounts that you apply for.
FICO Scoring Model Calculation (Weight) Factors
| Credit Factors | Credit Score Weight |
|---|---|
| Payment History | 35% |
| Credit Utilization | 30% |
| Credit Age | 15% |
| Different Types of Credit | 10% |
| Number of Inquiries | 10% |
Source: https://www.myfico.com/credit-education/whats-in-your-credit-score
All of these factors are considered when calculating your credit score. Some factors, ranked by their weight in the total score, count more than others. There are many different ways to improve your credit score, some of which can deliver rapid increases from 580 and some deliver results over longer periods of time.
What can you expect with a 580 credit score?
With a 580 credit score, while you are still considered to have Fair credit, there are plenty of lenders who will be willing to work with you, whether you are looking for a car, a house, or get a credit card. However, the chances are good that you will end up paying a bit more for the same items than someone with a better credit score.
Here’s a quick breakdown of average interest rates for different credit score ranges on some of the most common purchases impacted by credit scores.
Interest Rate Ranges for Different Credit Score Ranks
| Type of Loan | Poor Credit | Fair Credit | Good Credit | Very Good Credit | Excellent Credit |
|---|---|---|---|---|---|
| 30 Year Fixed Mortgage Interest Rate | 6.352% | 5.588% | 5.158% | 4.767% | 4.545% |
| Car Loan Interest Rate | 15.24% | 14.06% | 7.02% | 4.95% | 3.60% |
| Credit Card Interest Rate | 24.9% | 17.6% | 14.9% | 12.2% | 13.9% |
Source: Credit Sesame asked 400 members about their interest rates during a three week period beginning on January 18, 2018.
As you can see, you’ll end up paying a significant amount more in interest to purchase the same thing. For instance, the average credit card interest rate for someone with Fair credit is nearly 18 percent — this number is reduced for someone with Good credit.
Similarly, the interest rate on a car loan for someone with Fair credit can be upward of 14 percent — that number is closer to three percent with Excellent credit. In other words, it pays (literally) to try to improve your score.
Of course, there’s always room for improvement! If you’re not happy with your 580 credit score, one of the first (and best) things you can do is clear up any negative information on your report. Let’s look at how to do that.
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Dealing with negative information on your credit report
It’s no secret that negative information can have a huge impact on your credit score and your credit report — not to mention moving forward, your ability to get new credit with favorable terms. Negative marks do not last forever. There are several things that can have a negative impact on your credit score:
- Chapter 7 bankruptcy stays on your credit report for 10 years.
- Late payments or past due accounts stay on your credit report for 7 years.
- Accounts that are sent to collections stay on your credit report for 7 years.
- Chapter 13 bankruptcy stays on your credit report for 7 years.
- Hard inquiries stay on your credit report for 2 years.
Research has shown that many US consumers find that their credit reports contain errors. Over time that number has shown a decrease, but with just under 17 percent of Credit Sesame members still finding errors, it is wise to be vigilant.
Percentage of members and non members who found inaccuracies on their credit report from 2014-2018
| Found Inaccuracies on Credit Report | Members | Non-Members |
|---|---|---|
| 2014 | 26% | 42% |
| 2015 | 23% | 39% |
| 2016 | 20.5% | 38.5% |
| 2017 | 17% | 37% |
| 2018 | 16.5% | 35% |
Source: Survey of 500 members and non-members who check their credit reports yearly. The survey was done in October annually.
The first step to improving your credit is to make sure that all the information on your current credit report is accurate. Next:
- File disputes for any inaccuracies; accurate information can’t be removed until it cycles off.
- Improve your previous negative habits and replace them with good habits. Bring any overdue accounts current, pay any liens (if necessary), work with collection agencies and creditors to clear up any collections, don’t apply for any new lines of credit, make sure to pay all of your bills on time, and pay down current debt asap.
Credit Report Inaccuracies, percentage resolved, and length until resolution
| Inaccuracies and resolution timeline | Members | Non-Members |
|---|---|---|
| Found Inaccuracies | 17% | 37% |
| Resolved Inaccuracies | 74% | 62% |
| Average Time for Credit to be Adjusted | <45 Days | 45-60 Days |
Source: Survey of 500 members and non-members who found inaccuracies on their credit report. Survey completed over the course of 9 months from December 1, 2017 – August 1, 2018.
The great thing about credit scores is they’re not permanent — there’s always room for improvement. In fact, one of our Credit Sesame members was able to improve his score by 60 points in just one year. Here is his story:
How George improved his 580 credit score to 640 in one year
Member Since: 7/12/2015
| We interviewed George on May 18, 2018; he earns $58,000 a year, is 39 years old and lives in Philadelphia, Pa. He is single and currently working to save up for a down payment on a mortgage. |
|---|
| What did you do to improve your 580 credit score? |
| I really wanted to improve my credit score in order to buy a house. The first thing I did was sign up for Credit Sesame so that I could access my credit report card. That showed me the things that were pulling down my score. In my case, I was using far too much of my available credit month to month. I read on Credit Sesame that you want below 30 percent of your available credit used, and I was up at 52 percent. I first stopped buying things on my credit cards, only using them if I had to. Thankfully I only had one emergency, my dog got sick and I had to take her into the Veterinarian. I then looked at the cards I had and started paying as much as I could on the one with the highest interest first while still making minimum payments on the others. Once that one was almost paid off, I began paying on the next highest interest card. That didn’t just bring my total utilization down, but it saved me a lot of money on interest. |
| What is your score now? |
| Now my score is 645 and I keep working to improve it every month. |
| How long did it take to improve your score? |
| Improving my 580 credit score took about a year. Most of the efforts are short, but it just takes time for the changes to take effect, be reported and then finally work to improve your score. It’s worth it though! |
George’s story is a great reminder that improvement is always attainable and although your 580 credit score may keep you from getting the best interest rates right now, you can take steps to improve your score and financial situation.
TLDR; how to get above the 580 credit score mark
To recap, while a 580 credit score certainly isn’t the best score you can have, you still have plenty of options when it comes to your credit (even though you may have to pay a bit more for them). The best thing you can do is to take the proper steps to work to improve your score.
The good news? Time, along with the proper steps and action, can improve even the lowest credit score. The impact of the negative factors on your score lessens, and the negative marks will eventually fall off completely — leaving you with a higher score. While you’re waiting, good credit habits will help you build positive credit. These behaviors today mean that when the negative reports cycle off of your credit report in the future, you’re left with a better score.
