It’s Tuesday; time to take another in-depth look at a specific credit score.
Today, it’s the infamous “500 credit score.”
If you’ve got a 500 credit score, you’ve got a bad credit score.
I hate to say it, but it’s valid. And this is true whether you are using the FICO score or VantageScore credit score scale.
500 FICO Score Is Terrible!
As far as FICO is concerned, a 500 score is 350 points below the highest credit score possible, and just 200 points clear of the bottom.
And only about 5% of the population have credit scores in this range, so you’ve clearly done something pretty bad to end up here.
Chances are you’ve got late payments, and probably something worse, such as a collection or a charge-off.
With a credit score this low, it wouldn’t be surprising to see something as major as a foreclosure or a bankruptcy somewhere in your credit history.
Long story short, a 500 FICO score only comes about if your credit report is dominated by negative activity, with very little, if any, positive activity.
So it’ll be in your best interest to get a credit report and determine what’s holding you back.
With a 500 FICO score, your chances of getting a mortgage, auto loan, or a credit card are all very slim, and you’ll likely be overpaying for your car insurance.
In other words, you’re throwing money down the drain. So take action immediately!
500 VantageScore Not Possible
If it’s a VantageScore credit score, a 500 credit score is even worse. Well, actually it’s not worse, it’s non-existent. The lowest VantageScore is 501, so you’d be one point below rock-bottom.
Even a 501 VantageScore is so low that it’s probably very, very uncommon. I’d actually be surprised to see someone with a credit score this low. You’d basically have to do everything wrong to end up here.
It would be just about as hard as Brewster spending his millions to earn his inheritance.
In any case, there’s a good chance you’ve got a major derogatory mark on your credit report, such as a foreclosure or bankruptcy, and maybe some tax liens mixed in for good measure.
Late payments, collections, and charge-offs are also probably prevalent.
In fact, there’s really little good to say about a 500 credit score, so if this is where you stand, it’s time to take immediate action.
Get a copy of your credit report immediately and go over each item with a fine-tooth comb – determine if there are any errors and take measures to dispute them (a credit score monitoring program typically makes this easy to accomplish).
Also work to get any derogatory accounts back in good standing by making the minimum payments and settling any penalties, assuming you aren’t disputing these accounts or declaring bankruptcy.
And ask your lenders for better interest rates or work out payment plans to get out of debt.
If balances are high, work to pay them off, and for goodness sake, don’t apply for more credit until the existing stuff is paid off. You probably stand zero chance of getting approved anyways…
There’s a lot of work to do if you’ve got a 500 credit score, but if you avoid further missteps and take action to right the wrongs, you could wind up with a good or excellent credit score in the future.
Just be patient. It’s going to take a while.
See also: 600 credit score, 700 credit score, 800 credit score.