How to Get a Loan with a 500 Credit Score

When you apply for a loan from a lender, one of the first things they’ll consider is your credit score. A credit score is a numerical value that reflects your reliability in repaying debts. A low credit score can make it challenging to secure a loan with favorable terms and interest rates. 

Is a 500 credit score good? 

A 500 credit score isn’t the worst, but it’s far from ideal. On the credit score scale of 300 to 850, a score of 500 is below average. Generally, a number above 700 is considered a good credit score. 

Factors that affect your credit score 

Your credit score is influenced by various factors, including: 

• Payment history. Consistently making on-time payments boosts your score, while late payments can significantly lower it. 
• New credit accounts. Getting approved for new credit can help your score, but opening too many accounts in a short period can be detrimental. 
• Credit utilization. Keeping a low credit utilization ratio is beneficial. Using most or all your available credit can hurt your score. 
• Credit history length. A longer credit history can improve your score, provided you have a positive payment history. 
• Credit mix. Having a diverse range of credit types, such as credit cards, student loans, and personal loans, can positively impact your score. 

➢RELATED: What Is the Average Credit Score by Age?

500 credit score loans 

Now that you know why you have a 500 credit score, let’s explore your loan options: 

Personal loans 

Different types of personal loans, including Payday Loans, Installment Loans, and Lines of Credit, are accessible to many borrowers. With a 500 credit score, you’re more likely to get approved by a direct lender rather than a traditional lender like your local bank or credit union. 

Apply for a personal loan

Secured loans 

If you don’t qualify for a traditional loan, consider a secured personal loan. Secured loans require collateral, such as jewelry, collectibles, or a car title. However, be aware that if you fail to repay the loan, the lender can keep your collateral. You should only take out secured loans from trusted lenders you are confident you can repay. 

Credit card loans 

With a 500 credit score, you might qualify for a credit card, though it will likely have high interest rates and a low credit limit. Alternatively, you can apply for a secured credit card, which requires a cash deposit and can help you rebuild your credit. 

Some credit cards allow you to borrow money against your credit limit. This type of loan is called a credit card cash advance (not to be confused with a payday Cash Advance). 

Auto loans 

You may be able to qualify for an auto loan with a 500 credit score, especially if you make a large down payment and show proof of income. However, you may only qualify for car loans with higher interest rates. 

Student loans 

Student loans are generally accessible regardless of your credit score, making them available to those with limited or poor credit. Even so, a lower credit score can result in less favorable interest rates and repayment terms. 

Co-signed loans 

Consider having a co-signer with a good credit score to improve your chances of securing a loan. A co-signer shares responsibility for the loan, which can help you qualify for better terms. 

What to expect from a bad-credit loan 

Bad-credit loans often come with: 

• Higher interest rates. Lenders charge higher interest rates to compensate for the risk of default. 
• Limited options. You won’t have access to as many loan types as someone with a better credit score. 
• Smaller loan amounts. Lenders may cap the amount they are willing to lend to minimize their risk. 
• Stricter terms and conditions. Expect more stringent repayment terms and potential additional fees. 
• Shorter repayment windows. Lenders may offer shorter repayment periods due to your credit history. 

➢RELATED: Online Loans for Bad Credit

Can I get a loan with a 550 credit score? 

Securing a loan with a 550 credit score can be challenging, but it is possible. This score is considered poor, limiting access to unsecured loans with favorable terms. Using a co-signer or opting for a secured loan can improve your options. 

Can I get a loan with a 580 credit score? 

With a 580 credit score, you have a better chance of securing a loan. A score of 580 is considered fair, providing access to more loan options with better terms and conditions. 

More on Loans:

• 400 Credit Score Loans
• 600 Credit Score Loans

Tips to improve a 500 credit score 

If you want to boost your odds of getting a good loan, you will need to improve your credit score. 

Check for errors on your credit accounts 

Mistakes happen, and it’s possible a late payment was accidentally attributed to your account. Be sure to review your credit report regularly and dispute any mistakes to have them removed. Once any mistakes fall off your credit history, you should see a boost in your credit score. 

Apply for a secured credit card 

You can generally get a secured credit card regardless of your credit score. Try to find a card that reports your payments to the credit bureaus. Use it responsibly to rebuild your credit. 

Pay your bills on time 

Timely payments are crucial for improving your credit score, so pay close attention to your due dates. Use a reminder app if it helps. 

Manage your credit utilization ratio 

Aim to use no more than 30% of your available credit. If you struggle with this, try to make a credit card payment every two weeks instead of every month. Ideally, you want to get to a point where you can pay off your balance in full each month. 

Get a credit builder loan 

Many people struggle with bad credit, which is why credit builder loans have become more commonplace. These loans help improve your credit score by allowing you to build a positive payment history. 

Be patient 

Improving your credit score takes time and consistent effort. Stick to your credit improvement plan and don’t get discouraged. 

Overcoming credit challenges: Your path forward 

A fair-to-poor credit score can make it harder to secure a loan with favorable terms, but this doesn’t have to be a permanent setback. If your 500 credit score is preventing you from getting the loan you need, we may be able to help. 

At Advance America, we look at factors in addition to your credit score, such as your income, employment, and ability to repay. Whether you apply online or in-store, we may be able to get you the money you need to move forward