A credit score of 500 or below is very poor and means that the affected individual cannot qualify for loans, mortgages, credit cards, or apartments among other things. Thankfully, it is entirely possible to raise the 500 credit score to a much better standing through a prolonged effort, commitment, and perseverance. Here’s what you need to learn about how long it will take and the process that it is going through.
What Does It Mean When You Have a 500 Credit Score?
These two credit scoring models—VantageScore and FICO—are the most often utilized ones available nowadays. For gauging the applicants' creditworthiness—ranging from 300 to 850—they both use credit scores. While a Vantage Score of 500 is likewise rather bad, with the score being 199 points below average, a FICO score of 500 is regarded as extremely poor, 150 points below normal.
In both circumstances, however, a 500 credit score indicates to the lenders that you are a high-risk client with prior financial responsibility issues and that should they trust you with their money. Consequently, loaning organizations would scarcely accept applications for fresh credit with such a score.
How Long It Takes To Repair A Bad Credit Score Of 500
Normally it will require effort of about one year sometimes two years constantly working to repair the credit score from that of 500 and below to a good one.
This is because components such as payment history and credit history, which contribute to about 65 percent of a FICO score, would require time to be repaired after being negatively impacted. Thus, even if you learn to pay off debt and manage credit efficiently, it may take a long time to improve your credit score after you messed up.
As such, you could experience slight score increases immediately without much effort. By acquiring positive information, clarifying mistakes, and decreasing credit usage, it is feasible to raise a 500 score by twenty to sixty points at first. However, moving into the 600s and above will require proper management of credit with positive scores consistently.
Possible Solutions to Having a 500 Credit Score
Here are the key steps to take to steadily increase your 500 credit score:
Pay All Bills on Time: The most important aspect, though, is that one should pay as much attention to timely payments on current accounts as possible. Credit history, which comprises the latest credit records, constitutes 10% of the FICO score. They said even if you make one payment 30 or 60 days late, the score reduces drastically. Make automatic payments wherever possible to avoid having to constantly remind your partner to pay you back.
Pay Down Revolving Balances: This is also a key consideration since individuals who use most of their available credit negatively impact their credit score. Most importantly, it should be the practice to keep balances on credit cards and lines of credit below 30% of the limit on each card if possible. Reduction of balances is the clearest way possible to reduce utilization. One also can transfer balance between credit cards so that a particular credit card is not maxed out.
Dispute Errors on Your Credit Reports: It is estimated that from 7 to 40 million Americans have negative items on their credit reports which affect their score. Read your reports very thoroughly and contest information that is wrong, obsolete, or that hasn’t been verified. The errors should be deleted when successfully identified, which would increase your score.
Become an Authorized User: Check your credit report and contact a friend or a relative with a good credit score and request to make you an authorized user on their credit card or loan. They will start contributing to your rating as well as to your credit report as long as you keep paying them on time.
Limit New Credit Applications: When rejected with a 500 score, it can be tempting to apply for new credit to try and increase the chances of approval. However, each time it leads to a hard inquiry that may reduce your score by several points for some time. Ideally, six months should elapse before reapplying with similar application profiles for the best results. They should also avoid closing any other cards they are not using since this will also decrease the total available credit limit.
Monitor Your Progress: It is important to know that the process of moving towards restoring your credit status will not always be smooth and linear. It’s recommended to check your scores every couple of months since this way you can observe the outcomes of useful and toxic shifts. There will always be disappointments in the form of late payments but there should always be joy in seeing new positive data like new positive records and lower levels of debt.
However, if one sticks to his or her task and makes responsible credit moves, it is possible to take a 500 credit score significantly in one to two years. By then, you would have worked your way to fix your credit position and be able to access credit and loans at better terms and rates once more!
The most crucial aspects consist of not incurring any more late payments, keeping credit utilization rates low, and letting the positive information get updated on the credit report again. Stay with it and exercise your fiscal responsibility and all the efforts to mend your credit score will not be in vain.
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