Is it possible to get a loan if you have a 500 credit score? If yes, what is the approximate amount you can expect? This article outlines what you need to know about your 500 credit score and most importantly, it covers some loan options suitable if you have such a score.
Is 500 a Good Credit Score?
A credit score of 500 is regarded as a “bad” score on the standard 300-850 scale. It is 200 points short of being a good score, used by many as a benchmark and 140 points away from being a “fair” score.
It can be difficult to get approved for a loan with such a score but at least, it is never impossible to get one. This is confirmed by the Equifax data which shows that 1 in 10 new credit card accounts are opened by an individual with a score under 580, a sure sign that getting a $500 loan is never impossible.
However, a 500 credit score not only limits your loan options but you also pay higher interest rates if you are approved for the loan. Here are some options you can consider if you have a bad credit with a score of 500.
500 Credit Score Loan Options
Auto loans and credit cards offer higher chances of approval if you have a 500 credit score. Forinstance, with such a score you can take out approximately 12% of your car loans versus just 6% of mortgages.
You can still get a $500 loan with this score but you do not necessarily need to borrow because you may not qualify for attractive terms just yet. You can consider improving your credit first before looking to borrow some cash. Here are some of the causes and remedies to a damaged credit score.
- Records of Delinquency and Default
Delinquency and default are one of the causes of a bad credit score. The effect of delinquency is clearly shown by the manner in which your credit score rebounds after the “hurdle” is offset. This is confirmed by a research carried out by FICO.
It showed that approximately 11% of individuals who fall 90 days behind on line of credit or a loan experience a rise in their score by at least 50 points once the delinquency is cleared. The best remedy for delinquency is to make up all the payments you have missed.
Defaulting on payments greatly damage your score and can lead to collections or even a lawsuit in the worst case scenarios. It is not mandatory to repay the whole amount at once because each make-up payment lowers your delinquency level. Therefore, you can approach it in bits until you make the whole payment in the long run.
- Cases of Foreclosure and Repossession
A case of foreclosure or repossession can possibly damage your credit score. Having your property repossessed or home foreclosed to cater to underlying loans or unpaid balances can hurt your credit score.
For instance, FICO states that you could expect to see your score fall from 780 to between 620 and 640 in case of any foreclosure or repossession. A 720 score, on the other hand, would see you fall to between 570 and 590.
Foreclosure or repossession come after huge missed payments and are always likely to be accompanied by collections accounts. You need to avoid it like the plaque because it leaves a negative information on your report which can last for as long as seven years.
Consider rebuilding your credit score slowly by initiating a pattern of on-time payments on your lines of credit or loans. You should strive to add positive information to your credit reports each month by having at least one credit account.
Don’t imagine the kind of damage bankruptcy can cause to your credit score.FICO reckons that it can lower even scores in the upper 700s to the mid-500s.The bitter truth is that it takes scores as much as 7-10 years to recover fully from it.Worse still, there is no practical way to lessen the impact.
You can catalyze the process by placing a deposit on a secured credit card or making regular purchases or on-time bill payments each month. The best option after contesting your bankruptcy proceedings in court is to get a secured credit card to help ease the rebuilding process.
Secured cards provide the best approval chances of any credit card.This is so because you have to place a maturity deposit which is refundable. The deposit becomes your spending limit. A report on your credit information is given to the major credit bureaus on a monthly basis in a similar manner to any other credit card.
Your card issuer gives a positive review of youraccount every month. You can use two tips to make sure the informationprovided is always positive. Paying your monthly bills on time or not using your card at all. If you don’t have any purchases to make, you will automatically receive credit for on-time payment.
Suitable Credit Cards for a 500 Credit Score
A secured card is the ideal option to enable you to get a $500 loan if you have a 500 credit score. You may not be using it to make purchases but it can add positive information to your report on a monthly basis, helping to improve your score in the process.
It is worth noting that with all the good features of a secured card, it does not offer an emergency fund. You can turn to an unsecured card for an emergency fund if you have a bad credit. However, such deals often come with limitations including high rates and fees while offering very little amounts. Nevertheless, they can be your sole option.
Good credit cards for a 500 credit score include Green Dot Primor, OpenSky Secured Visa, Credit One Bank Platinum Visa, Fingerhut Credit Account and First Progress Platinum Elite MasterCard. Repairing a 500 credit score demands more than just picking the right credit card.
You still need to use your card responsibly while sticking to your other financial obligations and avoiding any negative information on your credit report.
A 500 credit score is undoubtedly a “bad” credit. However, there are always valuable options to pick from in order to get a loan if you have such a score. A good research should guide you but at the same time, it is advisable to choose what suits you best.