If you’re reading this, you’re probably asking, Am I likely to be approved for a credit card if my current credit score is 500. Let me clarify this, in the beginning: Yes, it’s possible. I’ve experienced such situations, holding the disappointment of unfamiliar accusations and feeling lost on how to regain my financial position.
But there is some good news: Even though you have a poor credit score, there are steps that you can take in order to help recover the situation.
This guide is designed to be user-friendly, guaranteeing you that you follow the necessary steps required to make sound decisions which will help in shaping your financial future.
Key Takeaways
- If you want to be approved for a credit card on a 500 credit score, it is utterly possible. However, you will need to make the right card selection and start with baby steps.
- Secured credit cards might come as the best suggestion in such case as it provides lower risk level whilst affording the opportunity to build up your credit again.
- Subprime or store cards will do relatively the same job but have higher fees attached along with higher interest rate so use them cautiously.
- Making an effort to be making payments on the right time and at the right amounts will in time improve your ranking enabling better measures being taken for you.
What Does a 500 Credit Score Mean?
First things first, a 500 credit score is seen as bad by most lenders. According to most lenders, a credit score can vary between 300 and 850 and having a higher score increases the chances of obtaining a credit card, applying for a loan, or seeking out for any other banking service. A 500 score indicates what?
- It is an indication of financial problems. With such laag score, it is expected that the person has missed out on important payments, utilization of credit has gone too high or even worse, insufficient cash to pay off the loans.
- Lenders see you as high-risk. In there opinion, having a lower score means you are likely not to repay the money owed to them.
And here’s the thing, however. Credit Score is not something to be permanent, It is like a picture of your finances, and it can be changed with effort and time.
Can You Get Approved for a Credit Card with a 500 Credit Score?
The short answer is yes, but it’s not as easy as just walking into a bank and getting a premium rewards card. You will nevertheless have some options, though they may be few. Focus on credit cards tailored for individuals with low credit standing which includes these two broad categories
1. Secured Credit Cards
Secured credit cards are among the easiest credit type for an individual with a 500 score. To qualify for a secured card, you have to first make a refundable security deposit which in most cases becomes your credit limit. For instance, the maximum limit you can spend on the card is the amount deposited say in a $200 deposit made.
There are some reasons why secured cards are great options, for example:
- Easier Approval: With secured cards, the risk to lenders is much greater because there is a deposit involved making them more willing to provide one. If payments are not made, the issuer can use the deposit made to settle the debt.
- Credit Building Opportunity: Since most of the secured cards report payment history to credit bureaus, this gives you an opportunity to raise credit score as time goes on.
Nonetheless, these cards ought to be utilized tactfully for effective credit management. Always ensure that your dues are paid in full monthly and your credit limit is never maximized if you want to build a good credit history.
2. Subprime or Store Credit Cards
- Higher Interest Rates: A subprime credit card always has a higher APR (annual percentage rate) which makes repayment very challenging in the long run.
- Fees: With these cards, annual fees, application fees and even monthly maintenance fees may be applicable.
- Lower Credit Limits: You may be offered a very small initial limit on a credit card that can, with responsible use, be increased over time, albeit slowly.
How to Improve Your Chances of Getting Approved
If you want a credit card even when your score is around 500, then you need to work on securing card approval. Here’s how you can do that:
1. Check Your Credit Report
You may want to keep an eye on your credit report if you plan to apply for any credit card since inaccuracies may hurt your score. Here’s what to do:
- You can contact AnnualCreditReport.com. and request a copy of your credit report, free of charge.
- Check to see if there are any errors, such as late payments that are incorrect or accounts that do not belong to you.
- Submit a complaint with the credit bureaus (Equifax, Experian, and TransUnion) if there are mistakes in the reports that were submitted.
2. Lower Your Credit Utilization
The credit limit is an amount of borrowing you are given by the credit companies, and the way you see it is called credit overuse. This proportion is normally less than 30 so it is ideal.
- If your outstanding balances are high, you should start lowering them down.
- Remember, even minute payments contribute a lot of savings in the long run.
3. Apply for the Right Cards
Credit cards don’t cost the same, out of focus and applying for the wrong ones damages your score further because of hard inquiries. Instead, aim for the following :
- The cards targeting this group are specifically designed for those with poor credit scores.
- Secured cards or secured loans are those which require a deposit and in return report to the 3 major credit bureaus.
4. Show Financial Stability
Lenders will explore more than just the credit score when a card is being applied. Consider these factors for emposing your points:
- A steady income.
- With a good payment history on rent or utilities
- Debt to Income ratio very low.
Best Credit Card Options for a 500 Credit Score
A 500 credit score is too low and might make it impossible for anyone to find a good credit card. Fortunately, there are specific cards which are targeted towards people who find themselves in this situation – they can help you recover your credit and start your financial journey afresh.
Nevertheless, the availability of these sorts of cards varies drastically among creditors so make sure to read the terms and conditions before choosing one.
1. Secured Credit Cards
Secured credit cards are often the best credit cards to get if you have a poor credit score since that means that they will first require you to place a refundable deposit , therefore significantly reducing the lenders risk. Below are two of the top secured cards available:
Discover it® Secured Credit Card
Key Features:
- Earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter.
- Earn unlimited 1% cash back on general purchases.
- No annual fee.
Why It’s Great:
This credit card is one of the rare credit cards that allow you to earn rewards on secured credit cards which makes it stand out, furthermore, there is also a possibility for you to upgrade to an unsecured card after seven months since the company reviews your account then.
Who It’s Best For:
People who want to earn rewards while repairing their credit.
Capital One Platinum Secured Credit Card
Key Features
- Different payment options that vary from $49 to $200 depending on the customer’s ability to pay.
- No annual fee present.
Why It’s Great
- While other secured cards will require you to pay a higher deposit this only requires a lower deposit amount while still providing the chance of building credit.
Who It’s Best For
-
For those who are seeking a deposit that is not too high and are looking for an easier alternative with no annual fee.
2. Subprime or Unsecured Cards
If you don’t already have a security deposit, most of the time, it’s going to be challenging to get your hands on a secured credit card. So, in this case, unsecured credit comes into play, but you need to keep in mind that unsecured cards will often come with steeper fees, high interest rates, and more responsibility on your part.
Indigo® Platinum Mastercard®
Key Features
- This card is meant for people with poor credit.
- The prequalification process will not affect your credit rating.
Why It’s Great
This is very easy to obtain even if your credit score is exceptionally bad.
Drawbacks
There are also high charges, such as annual fees or higher than normal APR.
Who It’s Best For:
Those looking for an unsecured card and are okay with high short term fees.
Milestone® Gold Mastercard®
Key Features
- Offers prequalification process that does not affect your credit score.
- This card reports to all the top 6 credit bureaus.
Why It’s Great
There is a direct and positive effect on your credit score when this card is responsibly used.
Drawbacks
There is an annual charge attached to this card, which can vary between $35 to $99 based on your credit history.
Who It’s Best For
Anyone who wishes to get an unsecured card but does not wish to go through the trouble of hard credit check during the first time application.
Rebuilding Your Credit After Approval
After Been Given Greenlight For Credit Card, Rebuilding One’s Credit As It Will Not Improve Instantly But With Consistent And Steadfast Efforts As Useful Tips Are Provided Below.
1. Pay on Time, Every Time
As 35% Of A Credit Score Is Based on the Repayment History Everyone Is Bound To Overpay Once Or Twice So Its Preferable to schedule out reminders or automatic payments.
2. Keep Your Balance Low
Don’t go overboard with your credit limit and try to fully pay off the balance amount every month, this will prove to lenders that you are able to handle credit limits without going crazy.
3. Monitor Your Credit Progress
Most of the issuers of the credit card provide users with free credit score monitoring tools which means that regularly checking your report is an option that is easily available.
4. Graduate to Better Cards
With improvement in your credit score, the card options available will have a better credit limit with less fees and higher rewards and in the case of better the perks than usage of an unsecured card may be preferable.
Common Mistakes to Avoid
Narrowing down to a few mistakes that I believe I made during my application can greatly help you out:
- Applying for Too Many Cards: This is the first mistake I did. With every application it invites a hard inquiry, which brings down your points for a fixed period.
- Ignoring Terms and Fees: A lot of cards considering their low credit score customer base have exorbitant charges built into them. Terms and conditions once again get you.
- Overspending: Using your credit card for everything can be deceiving so avoid being overexcessive on spending and going into debts.
My Opinion
First Credit Cards for persons with 500 has been close to a credit card, at least I am in the conclusion that it is achievable. I was in such position of once upon time and in the case where, I have seen the only missing answer to so many of these cases is beginning from the lowest level, focusing in the right cards and not abusing them.
The point is that it doesn’t happen in one day; it is in gradual work done over a period.
In my personal experience, tips from this guide best.
You will note that once you have buckled up the timely repayments and low balances your credit score moves up, and that movement does at times look slow but with time every movement will count.
