500 Credit Score Credit Cards: Do They Exist?

500 Credit Score Credit Cards: Do They Exist?

A below-average credit score can stunt your financial growth. It can make it more difficult to get a loan or credit card. If you’re approved, you’ll likely face more expensive loan terms. That doesn’t mean...

A below-average credit score can stunt your financial growth. It can make it more difficult to get a loan or credit card.

If you’re approved, you’ll likely face more expensive loan terms. That doesn’t mean a bad credit score has to hold you back.

Using credit cards and other credit accounts can help improve your score. If your credit score is around 500, you might be surprised by how many options you have.

Let’s take a look at 500 credit score credit cards and loans to help you boost your score over time.

How Your FICO Score is calculated

Your credit score usually refers to your FICO score, a three-digit number that’s a snapshot of your credit history.

The three major credit bureaus — TransUnion, Equifax, and Experian — calculate your score. Lenders use your score to determine your creditworthiness.

FICO scores range from 300 to 850, with 850 being considered a perfect credit score.

While the formula to calculate your score isn’t public knowledge, we do know what categories credit bureaus use when calculating.

Each category has a different weight, meaning that some are more important to your score than others.

  • Payment History (35%): Paying your bills on time is the most important factor in your credit score. Lenders want to be sure that you’ll pay them back after borrowing money. A credit history with a lot of missed or late payments can greatly hurt your score. Be sure to make at least the minimum payment each month.
  • Credit Utilization Rate (30%): This is the rate of how much of your available credit you’re using. It’s easiest to understand with an example: You have a credit card with a $1,000 limit. You spend $500 on the card. Your credit utilization rate is 50% because you’ve used that much of your available credit. Experts recommend trying to keep your utilization rate under 30%.
  • Length of Credit History (15%): Lenders prefer borrowers with a long credit history. This lets them see if a borrower regularly pays back their loans. Someone who’s been making consistent payments for 10 years is more likely to make their payments than someone who’s only had an account for a year.
  • Credit Mix (10%): Your credit report includes all different types of accounts. When it comes to your score, having experience in lots of different account types helps. Lenders like to see multiple types of credit to show that you can handle different products. For example, you might have an installment loan, like a car loan, as well as credit cards.
  • New Credit Accounts (10%): Opening too many new credit accounts at once can hurt your credit score. If you open several new accounts, it could tell lenders that you’re desperate for credit. Only opening one account at a time shows responsible use of credit.

What It Means to Have a 500 Credit Score

Your credit score doesn’t define you, but having a 500 credit score could lower your chances of getting credit.

Borrowers with lower scores are less likely to be approved for a loan or credit card. Those who are approved may face less-than-ideal credit terms.

Some lenders have credit requirements they use to approve loans. For example, let’s say you apply for a loan.

The lender requires you to have a 600 FICO score, but you have a 500 score. Your application is rejected after a credit check.

You apply to a different lender with a lower score requirement and are approved.

However, your loan terms include a higher interest rate and large monthly payment because of your credit score.

The good news is credit score requirements vary by lender. That’s why it’s so important to shop around when looking for a credit card or loan.

You may have to look for 500 credit score credit cards or loans specifically. Some lenders are even moving away from using credit scores by focusing on borrowers with a steady income and low debt-to-income ratios.

Can I Get a Credit Card with a 500 Credit Score?

You can find credit cards with a 500 credit score.

Be aware that you’re unlikely to get a lot of perks, like rewards or travel benefits.

You’ll also still deal with high interest rates and the risk of overspending and putting yourself into debt.

The best credit card offers for low credit scores include:

  • Secured Credit Cards: A secured credit card uses an upfront deposit to guarantee your card. The credit card company will put your refundable security deposit in a bank account. This amount is usually equal to your credit limit. Your credit card company uses the money to pay your bill if you can’t make your monthly payments. Many cards will refund your deposit and give you a higher credit limit if you make on-time payments consistently for the first year.
  • Student Cards: Some credit card issuers offer unsecured credit cards with low credit limits and credit requirements. You don’t have to be a student to apply. These options are your best chance of getting a 500 credit score credit card with no deposit and no annual fees. Many student cards also have a cash back rewards program for cardholders. 
  • Rebuilding Credit Cards: These cards are for people who are trying to improve their low credit scores. Credit score requirements for rebuilding credit cards are low, so you have a better chance of being approved with poor credit. Most rebuilding cards have an annual fee.

Are 500 Credit Score Credit Cards A Good Option?

Trying to get a credit card with a 500 credit score could be difficult. Any cards you qualify for may not have the benefits you want from a card, like rewards. You’ll also likely have to deal with a higher interest charges and low credit limits.

A better idea may be to work on raising your credit score before applying for a card.

Using credit responsibly for several months or a year could help improve your credit profile. This will help you qualify for better credit cards.

Alternatives to a 500 Credit Score Credit Card

Credit cards aren’t the only way to build credit. Use these alternatives to help improve your credit history and get good credit:

  • Credit-building Loans: You can find short-term loans for small dollar amounts to help you build your credit. These loans, like the one from Possible, let you get cash fast and potentially improve your credit score. The smaller loan amount makes the monthly payment more manageable — giving you a better chance of making on-time payments to help your score.
  • Credit Reporting Services: Some services help report your regular bill payments to credit bureaus. For example, you might be able to add your cell phone bills to your credit report. This can help you build a credit history even if you don’t have a credit account. However, many of these services have a fee and most don’t report to all three major credit bureaus.
  • Authorized User: Family and friends can add you to their credit card account. As an authorized user, you’ll get a card in your name even though you don’t own the account. Just be aware that any spending on the card goes to the account owner’s balance and they have to pay the bill. This could cause problems in your relationship. 

Bottom Line

Credit cards and loans — when used responsibly — are a great way to improve your credit history.

It’s important to pick a card or loan product that you can afford and make your payments by the due date.

If you stay on track, you could see your 500 credit score start going up and start qualifying for better credit products.

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