Having a credit score of 500, one is deemed to have a very poor credit score and normally will not be accepted for loans, mortgages, credit cards, or any other line of credit. Fortunately, it is not impossible to reverse the situation if your score is this low and improve your credit score. By employing some patience and discipline, it is quite possible to start a steady upward trend and thus restore one’s credit score and access to cheap credit.
Getting Started
The initial step is to know precisely why your score is low or why it is low in that particular area. Go online to AnnualCreditReport.com and obtain copies of your credit reports, then search through them for signs of negativity such as late pay, defaults, collection accounts, and judgments. This will help to identify which areas are contributing to a low score.
Next, arrange to do as much as you can to overcome these problems to achieve the least possible interference. Be sure to pay off your credit cards, get delinquent debts back on track, challenge any inaccurate information, negotiate pay-for-delete deals on your old collections, and so on, you may not get your score up instantly but you will prevent it from getting worse.
Also, create payment reminders, so you do not miss any more due dates in the future; this alone may cause scores to begin to climb gradually.
Build Positive Credit
However, cleaning up many credit mistakes might take time, and the quickest way to increase such a low score is to include more positive information on your credit reports.
To this, one of the best ways that is effective is to get secured credit cards. These have a refundable security deposit which forms the limit of credit given to the cardholder. They enable one to prove that one is capable of paying bills on time and being a responsible credit user despite a bad credit rating. Make purchases with the credit card for small amounts every month and successfully pay your balance in full and on time.
Another way to build credit history is by adding yourself as an authorized user on someone’s credit card. This can be of great usefulness in building credit, provided they handle the account properly.
Last but not least, many cell phone providers, utilities, and even online accounts update the credit bureau on the payment history of customers. Other activities that can help you build your score include having positive payment histories in those areas.
Be Patient
To achieve these when starting from a 500 credit score, it will take some time before one starts seeing the desired outcomes. Therefore, be prepared to make a continuous effort to adhere to the credit best practices before your score goes up, possibly within the next one or two years. Try to follow through with it and check your scores after three to four months to see any improvements.
This means that the higher the score increases over time, the more other things such as approval for new credit and better interest rates will be easier to achieve. It is strategic to strive to achieve scores above 700 in both components since these lenders consider them excellent for loan approval and interest.
It is possible to recover your 500 credit score, although it will take time and effort along with discipline. Eliminate negative information, where feasible, open new accounts that portray a favorable credit history, maintain credit card balances low, and pay off all credit card accounts in full and on time. If you keep to this plan, you’ll see your credit improve gradually over time and that’s exactly what credit needs – consistency.
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