500 Credit Score: How to Rebuild and What You Can Still Qualify For

A 500 credit score is considered very poor. You face serious challenges when applying for credit, housing, or loans.

Lenders see you as high-risk. Most will reject your applications or charge you steep interest rates.

You’re not alone in facing these challenges. About 16% of U.S. adults have credit scores below 580.

The good news? You can rebuild your credit. Many people have recovered from this position with consistent effort.

What a 500 Credit Score Means for Your Life

A 500 score falls near the bottom of the 300-850 credit score range.

Your daily life takes a hit in several ways:

• You’ll pay higher deposits for utilities and phone service
• Landlords may reject your rental applications
• Car insurance costs you more money
• Credit card approvals are rare and expensive
• Some employers may hesitate to hire you

Your score doesn’t reflect your character. It shows you’ve experienced financial struggles like missed payments, collection accounts, or loan defaults.

How Lenders View Your Score

FICO and VantageScore use different names for score ranges. Both scoring models place 500 in their lowest tier.

FICO calls scores from 300-579 “Very Poor.” VantageScore labels 300-600 as “Subprime.”

Lenders worry you’ll fall behind on payments. Your past credit behavior predicts future risk in their eyes.

You face rejection more often than approval. When you do get approved, expect expensive terms.

Credit Score Ranges You Should Know

Understanding where you stand helps you set realistic goals.

FICO Score Ranges:

• 300-579: Very Poor
• 580-669: Fair
• 670-739: Good
• 740-799: Very Good
• 800-850: Exceptional

VantageScore Ranges:

• 300-600: Subprime
• 601-660: Near Prime
• 661-780: Prime
• 781-850: Superprime

Higher scores mean lower risk to lenders. Lower scores trigger higher costs and more rejections.

Five Factors That Control Your Credit Score

Your score comes from data in your credit reports. Five elements determine that three-digit number.

Payment History (35%): Late or missed payments devastate your score. On-time payments rebuild it faster than anything else.

Credit Utilization (30%): Using too much of your available credit hurts you. Keeping balances low relative to your limits helps significantly.

Account Age (15%): Older accounts in good standing boost your score. Time works in your favor here.

New Accounts (10%): Opening multiple accounts quickly signals financial stress. Space out new credit applications.

Credit Mix (10%): Having different account types shows you can manage various credit forms. Cards, loans, and mortgages create a healthy mix.

Credit Reports vs. Credit Scores

Your credit report lists your credit history over 10 years. Three bureaus create these reports: Equifax, Experian, and TransUnion.

Your credit score is calculated from information in these reports. Lenders use that three-digit number to make fast decisions.

Reports contain details. Scores provide quick risk assessments.

Getting a Credit Card With Your Score

Traditional credit cards rarely approve applicants with 500 scores. Major banks see too much risk.

Store cards might approve you, but they charge brutal interest rates.

You face a frustrating catch-22: You need credit to rebuild credit.

Secured Cards Offer a Solution

Secured credit cards work differently. You put down a refundable deposit (typically $100-$300). That deposit becomes your credit limit.

Use the card for small purchases monthly. Pay the full balance every month without fail.

The card issuer reports your payments to credit bureaus. Your score gradually improves with consistent behavior.

Our partner Kikoff offers credit-building tools designed specifically for people rebuilding their financial lives.

Renting an Apartment With a 500 Score

Renting becomes harder but remains possible. Large property management companies use automated screening that often rejects low scores immediately.

Focus your search on individual landlords instead. They review full applications and consider your current situation.

Strategies that improve your chances:

• Write a brief explanation of your credit issues and recent improvements
• Show proof of stable income with recent pay stubs
• Offer to pay a larger security deposit upfront
• Find a co-signer with good credit
• Provide references from previous landlords

Individual landlords often value character and stability over credit scores alone.

Buying a Home Is Challenging But Possible

Mortgage approval with a 500 score requires extra work. You’ll need compensating factors that reduce lender risk.

Elements that strengthen your application:

• A co-borrower with stronger credit
• Proof of steady employment and income
• A healthy debt-to-income ratio below 43%
• A larger down payment

FHA loans accept lower credit scores than conventional mortgages. These government-backed loans sometimes approve borrowers in your score range.

Expect higher interest rates and stricter terms. Your monthly payment will cost more than someone with good credit.

Seven Strategies to Rebuild Your 500 Score

You can turn your credit situation around. Many people have recovered from worse positions.

Recovery takes time and consistent effort. There are no quick fixes or shortcuts.

1. Address Your Existing Debt

Overwhelming debt often causes low credit scores. You can’t rebuild effectively while drowning in payments you can’t afford.

A debt management plan from a nonprofit credit counselor can help. Counselors negotiate lower interest rates with creditors. You make one monthly payment to the counseling agency.

Our partner Cambridge Credit Counseling offers free consultations to review your debt situation and create a personalized plan.

If your debt load is too large to repay in 3-5 years, bankruptcy might provide the fresh start you need. Chapter 7 bankruptcy eliminates most unsecured debts in about four months.

2. Review Your Credit Reports Thoroughly

Errors on your credit reports drag your score down unfairly. You’re entitled to free reports from all three bureaus annually at AnnualCreditReport.com.

Check for these common mistakes:

• Accounts belonging to someone else
• Incorrect payment dates or amounts
• Duplicate listings of the same debt
• Accounts marked open that you closed
• Wrong personal information

Dispute errors directly with each credit bureau. They must investigate within 30 days. Removing mistakes can boost your score immediately.

3. Use a Secured Credit Card Responsibly

Secured cards accept applicants with poor credit. Your deposit (usually $100-$300) becomes your credit limit.

The card functions like any other credit card. You make purchases and receive monthly statements.

Follow these rules strictly:

• Charge only small amounts each month
• Pay the full balance before the due date
• Never max out the card
• Keep utilization below 30% of your limit

Each on-time payment builds positive history. After 12-18 months, you’ll see noticeable score improvement.

4. Try a Credit Builder Loan

Credit builder loans help you save money while building credit. You make monthly payments into a locked savings account.

When you finish all payments, you receive the saved money back. The lender reports every payment to credit bureaus.

You’re building payment history without taking on new debt. Each on-time payment strengthens your credit profile.

Credit builder loans typically run 6-24 months. They work especially well if you have few active accounts.

5. Report Your Rent Payments

You already pay rent every month. Those payments should count toward your credit score.

Most landlords don’t report to credit bureaus automatically. Rent-reporting services fill this gap.

Some services require landlord participation. Others don’t need any involvement from your landlord.

Choose services that report to all three major bureaus. Reporting to just one bureau limits your benefit.

Free rent-reporting services exist. You don’t need to pay monthly fees for this benefit.

6. Make Every Payment on Time

Payment history represents 35% of your credit score. Nothing matters more than consistent on-time payments.

Set up automatic payments for all bills. Remove the risk of forgetting due dates.

Even one 30-day late payment severely damages your score. Missing payments by 60 or 90 days causes even worse harm.

If you can’t pay the full amount, pay the minimum. Your payment history stays clean when you meet minimum requirements.

7. Lower Your Credit Utilization

Credit utilization measures how much available credit you’re using. Keep this ratio below 30% on each card.

Strategies to lower utilization:

• Pay down existing balances aggressively
• Make payments twice per month instead of once
• Request credit limit increases on current cards
• Spread purchases across multiple cards

Lower utilization signals responsible credit management. Your score responds positively to this change.

How Long Recovery Takes

Rebuilding from a 500 score takes time and patience. You won’t reach excellent credit in a few months.

Realistic timeline expectations:

• 3-6 months: Small improvements if you follow all strategies
• 6-12 months: Movement into fair credit territory (580-669)
• 12-24 months: Potential to reach good credit (670+)

Negative items age off your report eventually. Most items disappear after seven years. Bankruptcy stays for up to 10 years.

As negative items age, their impact decreases. Recent positive behavior matters more than old mistakes.

Get Professional Help When You Need It

You don’t have to navigate credit repair alone. Nonprofit credit counselors provide free guidance.

Certified counselors help you:

• Understand your current credit situation
• Create a realistic improvement plan
• Negotiate with creditors when appropriate
• Stay motivated during the rebuilding process

Avoid for-profit credit repair companies that make impossible promises. Legitimate counselors never guarantee specific score increases.

Take the first step toward better credit today with tools designed for your situation.