How to Recover from a 500 Credit Score

Having a credit score of 500 is not ideal, but it is possible to recover from it. A low credit score can be damaging and disheartening, especially when applying for a loan or mortgage. FICO credit scores range from 300 to 850, and the higher the score, the lower the risk associated with lending you money or credit. When attempting to recover your credit, one of the most important numbers is your credit utilization ratio.

This includes the total balances of your credit cards divided by your total credit limit. Having a utilization rate lower than 30 percent is more attractive to lenders, as it shows that you are not taking full advantage of your credit cards. Falling behind on a mortgage payment can be serious, but you can recover from it in as little as nine months. Bankruptcy, however, can take 5 to 10 years to return to where it was before.

Under the federal Fair Credit Reporting Act, you have the right to challenge any information you believe to be false. If someone has stolen your identity and used up the limit on your credit cards, those charges may never be paid. However, using the credit you have already earned demonstrates your commitment to managing credit responsibly, which can increase your credit rating. If you don't meet the prerequisites for a loan, you may need to apply for a lender without a credit check or a secured personal loan.

Adding one more late payment isn't as important as it would be for someone with a clean credit report, according to Miron Lulic, founder and CEO of SuperMoney. Credit unions tend to have more lenient personal loan approval requirements than banks and may be willing to consider applicants with bad credit. Secured cards generally provide the best chance for someone with a 500 credit score to regain their creditworthiness. Student loans are some of the easiest loans to obtain with a 500 score, as nearly 25% of them are granted to applicants with a score lower than 540.The best way to improve a 500 credit score is to check out the credit analysis page of your free WalletHub account.

People who are close to you may not care about your credit rating and may be willing to lend you a loan. You can also get personalized tips for improving your credit and credit card tips with a free WalletHub account. You can find local credit unions on WalletHub and check with them to see if you have a chance of being approved.Foreclosure on a home or other property can cause your credit rating to go from excellent to poor. When used responsibly, the right credit card for someone with a 500 score can put them on the path to good credit.

It's important to note that any personal loan you get with a 500 score will likely have an extremely high APR and an expensive opening fee. In order for the lender to decide whether or not they will lend you money, they will need to obtain your credit rating (and often a credit report) during their consultation.

Samuel Howard
Samuel Howard

Credit Repair Consultant 👋 I specialize in helping entrepreneurs start their own credit repair business, as well as assisting existing businesses to improve their operations.