For this article, we’ll assume you’re looking at a FICO score (the most commonly used by lenders) or a VantageScore (the score most commonly used on free-scoring sites, such as Credit Karma).
We hate to be the bearer of bad news, but …
… a 500 credit score is considered a poor credit score by most lenders.
That means you’ll be limited in what kind of card you can get. With a score this low, you are unlikely to qualify for any regular, non-secured credit card. You probably won’t even be able to get a plain vanilla store card. But hope is not lost. You can really only improve from here and it’s totally possible to start building your credit now.
How your score compares
Here’s what various score ranges mean (based on definitions from Experian regarding FICO scores):
500 credit score – what it means
|800+||Excellent||Consumers in this range can expect easy approval for credit products and the best terms.|
|740-799||Very good||Consumers in this range can expect to qualify for a wide range of products and are eligible to receive favorable terms.|
|670-739||Good||Consumers in this range may vary in their qualification for credit products. Those at the lower end may get denied for premium products, or may have less-favorable terms/lower credit limits. Still, getting approved for a card or loan is absolutely feasible.|
|580-669||Fair||Consumers in this range can expect higher interest rates and may not qualify for some credit products. Results will vary, based on whether the score is due to thin credit history or a troubled one (bankruptcies and late payments).|
|579 and lower||Poor||Consumers in this range will have trouble qualifying for most credit products.|
You are at the bottom of this chart, meaning lenders see you as a high risk and someone who may default on their debts.
Cards you can get with a 500 score
- 1. Secured cards: Browse your options here. These cards require you to put down money upfront to secure your credit line. That way the issuer doesn’t have to worry if you’ll pay them back. Your limit will probably be low, and there may be an annual fee (although some secured cards have no annual fee). But you don’t have to keep this card forever. Once the derogatory information on your credit report starts falling off, you can move on from your secured card to something better.
- 2. Other credit-building cards: You may qualify for a card that doesn’t require a security deposit. However, these will almost certainly carry annual fees or come with restrictions — the ability to spend things only with the issuer’s online catalog, for example.
- 3. Credit-builder loans: Some small banks, credit unions and other nonprofit financial institutions offer special loans designed for those struggling to build credit. You may have to put down a deposit up front or regularly paying an amount into a savings account with the bank (which you’ll get refunded later). But these loans report to the credit bureaus and often come with financial counseling.
- 4. Get added as an authorized user: If a loved one with great credit is willing to add you to their card account as an authorized user, their excellent credit history will cast a glow on yours. It’s not a silver bullet, though. If you have a 500 credit score, you probably have late payments or defaults on your credit reports. So becoming an authorized user won’t “trick” lenders into accepting your credit applications — they’ll see your reports and run. Still, once that damaging information falls off your report, the positive influence of that authorized-user account will give you the leg-up you need to qualify for a new card on your own. Just know this: If the main accountholder is irresponsible with the account, your credit score will fall.
More about credit scores
There are various scoring models out there, FICO being the most commonly used by lenders, VantageScore being the most commonly provided by free scoring sites. So, to create your credit-building road map, review the factors below. We’ve listed FICO’s scoring factors in order of priority (biggest to smallest):
- Payment history (35 percent of your FICO score): Payments are made on time.
- Utilization (30 percent of your FICO score): Use up as little of your credit limits as possible. At a bare minimum, stay below 30 percent. Preferably, you’ll stay below 10 percent. Cards designed for poor credit will come with low limits – so consider making just one small purchase on them a month OR paying your balance down several times a month to keep utilization low.
- Length of credit history (15 percent of your FICO score): FICO’s algorithm rewards you for accounts that have been open a long time. Rapidly opening new accounts will decrease your average age of accounts and lower your score.
- New credit (10 percent of your FICO score): Every time you apply for a new credit product, expect a hard inquiry, which will temporarily lower your score. That’s why it’s so important to pick a product you have a good chance of qualifying for – if you shoot to high, you’ll get rejected AND get hit with a score-lowering inquiry.
- Credit mix (10 percent of your FICO score): FICO (and, by extension, lenders) want to see that you can juggle a variety of credit types. Having both installment loans and revolving credit (ie, cards) on your report will help you maximize this factor.
This post was written or last updated May 2017