A poor credit score can be damaging – and demoralizing – particularly when you apply for a mortgage or new car loan. FICO credit scores range from 300 to 850 – and the higher the score, the less risk is associated with lending money or credit to you.
Events such as missed payments, foreclosure and bankruptcy all lead to a poor credit score. A FICO score or other credit score of 500 or below is considered very poor. The good news is, no matter the reason for your low number, there are things you can do now to raise your credit score.
10 Things to Do to Raise Your 500 Credit Score
Negative assessments on your credit report can last up to a decade based on the severity, making it essential to take steps toward raising your credit score immediately. Click through for 10 simple ways to improve your credit score.
1. Make Payments on Time
Your payment history is the first indicator lenders review before approving credit. Setting up automatic payments can help eliminate the need to remember what bills to pay when, making it harder to miss a payment.
2. Keep Your Credit Utilization Ratio Low
When rebuilding credit, a key number is your credit utilization ratio, which encompasses your total credit card balances divided by your total credit limit. Having a utilization ratio below 30 percent makes you more attractive to lenders, indicating you do not max out credit cards.
Ways to decrease your utilization ratio include paying off existing debt and keeping a low credit card balance, as well as piggybacking on the credit account of a responsible user.
3. Pay Down Existing Debt
This might seem obvious, but reducing your current debt load can boost a 500 credit score. Focus on being aggressive with payments on credit cards with the highest interest rates first.
Check the interest rate of each card on your credit report. Once those cards are paid off, the unused credit lowers your utilization ratio. (more…)