- 10 Oct, 2023
Is 583 a good credit score or not? 5 easy ways to improve your credit score
4+ Reasons why people land a 583 credit score
Imagine this situation [We are sure most of you might have come across such an experience] - You can’t stop thinking of the house in the neighborhood you laid your eyes on, you keep picturing your family growing and countless memories being made in that house. Finally, you decide to set yourself on board to buy the house of your dreams.
You start searching from online listings and by visiting homes. With the selection in mind, you approach a mortgage lender and they review your financial background. At last, the loan officer puts down the papers and signs that your credit score is lower than 620!
That is the moment that makes your mind think a whirlwind of thoughts. Will I be able to buy that house? Can I still get a mortgage with a lower credit score? How can I improve my credit score? Or should I wait until the prices come down?
Hear us out! These thoughts are reasonable and yes your credit score matters but, there is nothing unattainable in this world. A 583 credit score is neither bad nor the best when it comes to securing a mortgage. In this blog, we will find out options to improve your 583 credit score, its impact on your mortgage applications, and understand if there are options to avail low credit score loans. Come follow us along to gain a practical overview of credit scores!
Spotlight on 583 credit score
To understand the fundamentals, credit scores range from 300 to 850. A 583 credit score falls somewhere on the lower end of this scale. It is considered to be a neutral score which is neither good nor bad. It shows that there could be a scope for improvement.
However, due to strict lender policies, many individuals feel that they should have a credit score of 600 and above. We will shed some light on this in upcoming sections to improve your credit scores and attain all your financial goals!
How do 583 credit scores impact your finances?
Having lower credit scores can drastically affect the way you manage your finances including your ability to secure loans, access credit, and investments in the long run. Here is how:
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Loan approval
A credit score of 583 can pose a challenge while applying for loans. You might be able to secure and get loan approvals,but lenders might categorize your application as caution especially if you require a larger amount. Due to this reason, they closely look at your financial background, including credit history as a main factor, and might demand additional documentation to check your creditworthiness.
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Interest rates
Even if the lender grants approval for the loan with your lower credit score, you might face difficulties while paying the interest. This is because lenders usually offer higher interest rates compared to borrowers with better credit scores. Lower credit scores are indicators of higher risk. So, in order to compensate for this risk, they charge higher interest rates. You end up paying more than the principal amount over the life of your loan.
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Credit card eligibility
With a 583 credit score, options to apply for credit cards are limited. You might again face higher annual fees and lower credit limits. These cards will be helpful in rebuilding your credit but they might not come with many rewards or benefits.
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Apartment rentals
If you are someone who is on the hunt for rental apartments, a 583 credit score can impact you in securing rental properties. Landlords often take a closer look at your credit scores. They check your financial reliability based on the credit score you hold at the time of seeking a rental apartment.
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Insurance premiums
Some insurance providers in certain states determine the premium amount based on the credit score you hold. It is important to note that insurance companies in California, Hawaii, Massachusetts, and Michigan can't use credit scores to calculate premiums.
Reasons why people land a 583 credit score
If you get a credit score of 583 and wonder how I ended up getting such a report. Here are the probable reasons why:
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Presence of bankruptcy
Having such public records on your credit report can take a significant hit on your scores as bankruptcy can stay on your credit file for up to 10 years. Even if the scores improve, your lenders might still be hesitant to work with you.
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Credit history and utilization ratio
Delayed and defaulted payments can highly impact your credit scores. Making timely payments has a positive impact on your credit scores. On the other hand, keeping your credit utilization ratio below 30% can help you maintain a healthy score. A credit utilization ratio is calculated by dividing the total balances on your revolving credit accounts by the total credit limit.
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Length of credit holding
If you are an avid credit card user and have been enrolled in credit applications for a long time now, that can also be one of the factors to impact your credit scores. The number of years you have been involved in using your credit can influence up to 15% of your FICO score.
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A mixture of total debt and credit
If you are a person with a single credit account and your credit score is 583, it is advisable to expand your credit portfolio. Whereas if you are someone who holds multiple credit accounts, including revolving and installment credit, your FICO scores tend to go up.
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Frequent credit activity
Your credit scores might perform lower if you take out new loans or credit cards continuously. Some lenders perform a hard inquiry and every time a hard inquiry is performed your credit score lowers by a few points, but it takes a few months to rebound as you handle credit bill payments on time.
Now that we have an overview of what a 583 credit score can do to your financial life, let us jump to understanding the ways to improve your credit score so you can get that mortgage approved.
5 ways to improve your 583 credit score
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Payment history
As discussed earlier, your payment history highly influences your credit score. So, make sure to complete your payments on time without missing any credit period. Be it payments for credit cards, loans, or other bills, if you have anything overdue, clear them up as soon as possible moving forward.
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Avoid overutilization of credit
This refers to the amount of credit you are using currently vs the actual credit limit you hold in your account. Maintain your credit usage as higher credit card balances might have a negative impact on your scores. Be responsible while using your credit cards. As mentioned earlier, make sure you have your credit utilization ratio below 30%.
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Manage outstanding debt
If you have existing debt balances to pay off, draft a plan to manage and close your debts as soon as possible. If you end up having higher credit card balances, we advise you to reduce the outstanding balance if you wish to improve your credit scores.
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Build your credit
Everything is in your hands! You can get a secured credit card and rebuild your credit. These types of cards are more accessible for those with lower credit scores. You can also ask one of your family members or a good friend to add you as an authorized user on their credit card account. The account’s positive payment history can potentially improve your credit scores as well.
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Monitor your credit
Regular checking of credit reports can help you find errors or discrepancies earlier and fix them on time so your scores don’t come down entirely. Review your report from time to time and get the scores fixed to get your credit scores right on track.
Must know data about credit scores
The median credit score of 658 for lower-income individuals suggests that many borrowers are unlikely to have access to affordable credit as those with scores above 720. (Federal Reserve Bank of New York)
Those considered high-income have the highest average credit score at 774. (American Express)
Ages 76 and up have the highest average credit score at 760. (American Express)
About 10% of the U.S. population doesn’t have a credit record and is “credit invisible.” (Consumer Financial Protection Bureau)
Older Americans have higher average credit scores. The average credit score for baby boomers is 742, while the average credit score for millennials is 687.
FICO Scores breakdown from poor to excellent
800 to 850: Exceptional
740 to 799: Very good
670 to 739: Good
580 to 699: Fair
300 to 579: Poor
How to get low credit score loans?
Securing loans while facing a lower credit score can be challenging but there are ways to find your way out and still apply for loans. But, these low credit score loans come with higher interest rates and a strict checking process. Be prepared to provide any additional information or documentation your lender may ask for in order to approve your low credit score loans.
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You can get loans that are backed by collateral, such as your car or savings account, which can make it easier to qualify for them. This reduces the risk for the lenders making approval easier.
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The next option is a payday loan, which is not an obvious choice for many borrowers due to their higher interest rates. Borrowers consider them as a last resort and not a primary option.
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If you are a member of a credit union, then you can get more favorable rates than banks. Sometimes they come with higher interest rates, so decide wisely.
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Lastly, having a cosigner who can vouch for your repayment capability can also increase your chances of improving your loan approvals.
We recommend utilizing these options as a last resort if you are in immediate need of funds. Low credit score loans might offer you financial aid for the time being but they come with higher interest rates that you would not be able to manage in the long run.
A 583 credit score is not final, although it could be a setback for many individuals who are in immediate need of financial assistance. Everything is attainable and there are ways for it. With a thorough knowledge of what your credit score represents and taking steps to improve it will highly benefit you in securing the right mortgage.
There are no guaranteed overnight solutions, it takes time to improve your scores and with consistent efforts, you will definitely hit the ideal score range that your lenders are looking for. If you want to manage your credit scores and gain additional information to make the right financial choices, head to our blog. With commitment and continuous efforts, we are sure you will upgrade your 3-digit score.
