Pop Quiz: 1 out of 15 people have what?
Answer: A credit score below 500.
FICO scores run on a 300 to 850 scale and reportedly only 6.3% of the US population has a 300-499 score. So I hate to be the bearer of bad news, but if you have a 500 credit score you are about as low as you can go.
The good news? It is possible to start building your credit now.
1. You won’t qualify for any traditional credit cards
With this low of a score, the truth if you are not going to qualify for any regular credit card. Not even a no-frills Walmart store card will approve you with that kind of score!
So my first piece of advice is to try out this tool right now and find out in 60 seconds if you are matched for any credit card offers. IF you are matched for an offer, then go for it!
Use this tool since it matches you with offers. Don’t screw up your credit even more by randomly applying for cards from other places and hoping something sticks. Why? Because doing so might drop your score even further. Every time you apply for a card there is a credit inquiry made. Having too many can negatively impact your score. So the lesson is to only apply for a card you (a) really want, and (b) are confident you will qualify for.
2. Avoid other cards that sock you with excessive fees
There are a small handful of unsecured cards out there that will probably approve a credit score of 500. When you see the fees they charge, you will understand why.
Example: First Premier Bank MasterCard
With this lovely offer you will pay a $95 processing fee and $75 annual fee. And what do you get in return? A measly $300 credit limit. Oh yeah and a 36% interest rate to go along with it.
Does your credit suck? 500 sucks big time, but that doesn’t mean you deserve to get taken for a ride. Don’t fall prey to these fee-harvester credit cards.
3. Secured cards are your best (and probably only) choice
So with the exception of First Premier Bank, the only credit cards for a 500 credit score are going to be secured.
What does this entail? A security deposit. In exchange for ponying up a deposit, you will be able to get a card. But don’t worry, the deposit will be refundable whenever you choose to cancel your card.
Here is my favorite credit card to rebuild credit. Its fees are very reasonable (and I think you will agree with me too).
Now as far as getting a mortgage or auto loan with a 500 credit score… fat chance of that happening. Sorry.
This post was written or last updated November 9, 2013