What Can You Do with a Credit Score of 500?

Having a credit score of 500 is not ideal, but it doesn't mean that you can't get access to financial products. Credit cards and car loans are the best options for someone with a credit score of 500. Your credit score is an important factor in determining if you qualify for financial products and what interest rate you may be able to pay. Poor credit can be demoralizing, especially when you apply for a mortgage or a loan for a new car. FICO credit scores range from 300 to 850, with the higher the score, the less risk associated with borrowing money or credit.

When recovering credit, the credit utilization ratio is key, which is the total credit card balances divided by the total credit limit. Having a utilization rate of less than 30 percent makes it more attractive to lenders, indicating that it doesn't maximize credit cards. Interest rates for high-risk unsecured cards are also generally very high, with a rate above 25% not uncommon. It's best to pay the full balance each month to avoid fees as interest charges start to accrue. Unfortunately, financial literacy remains low in the US., With up to two-thirds of Americans unable to pass a basic financial literacy test.

This only means that the card issuer has requested to verify your credit as part of the approval process. Fortunately, credit cards are among the easiest new types of credit to obtain with a low credit score, especially if you choose a card designed specifically to help low-credit consumers rebuild their credit scores. Interest on credit card debt adds up quickly, so avoid borrowing more than you can pay each month, unless it's absolutely necessary. Paying on time every month in accounts that report to major consumer credit bureaus is one of the best things you can do for your credit. People with limited or poor credit histories benefit most from secured credit cards because secured credit cards often offer them better terms and interest rates (an average of 16%). You load the funds used to make purchases onto the card before you start swiping, so you'll never have to “borrow money” to complete a transaction like you would with a regular credit card.

To calculate the credit utilization rate of a credit card, divide the outstanding balance by the card's borrowing limit and multiply it by 100 to get a percentage. The Citi Double Cash Credit Card is one of the best cash back cards for earning more rewards when spending. Instead of going from dealer to dealer looking for a partner, you can use an online dealer network such as Auto Credit Express. If your credit history includes a bankruptcy filing, you may still qualify for an FHA loan if the bankruptcy was at least two years ago (one year in some cases).It's almost impossible to get by without some kind of plastic payment method; if you don't have a credit card, you often need at least a debit card for things like shopping online or renting a car or hotel room. If you rent, there are now third-party reporting services that you or your landlord can use to report rent payments on time to credit bureaus. It only takes one serious financial event to fall behind on your debts and only a few late payments for your credit rating to crash.

The views expressed here are solely those of the author, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer.

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