According to most credit scoring models, a 505 credit score is considered bad credit.
Consumers with credit scores within the “bad” range may have trouble finding approval for certain types of loans or have to deal with other financial hardships.
However, there are some basic steps bad credit consumers can take to start increasing their scores right away. Here, you’ll learn how a 505 credit score can appear on your credit reports, what that means for your credit history, and how you can start working towards improvement and achieving a good credit score!
Key Takeaways for a 505 Credit Score
Overview of Your
Credit Rating
505 is considered a "very poor" or "bad" credit score. Scores between 300 - 579 are typically labeled as bad credit
Borrowing Options With a 505 Credit Score
Consumers with a 505 credit score, unfortunately, may not have many affordable financing options. Bad credit loans and payday loans are available but should be used cautiously
Improving a 505
Credit/FICO Score
Working on payment history, paying off debt, limiting new credit inquiries, and improving credit utilization can help raise a 505 credit score.
Is a 505 Credit Score Good?
505 is a part of the lowest credit score tier, indicating the consumer has a poor credit history. Consumers with FICO credit scores between 300 - 579 are a part of the "bad" credit score tier. Typically, the average FICO credit scoring model labels scores between 800 and 850 as "excellent" credit, scores between 740 and 799 as "very good" credit, scores between 670 and 739 as "good" credit, scores between 580 and 669 as "fair" credit, and lastly, scores between 300 and 579 as "poor" credit.
What Can You Get Approved for?
Self
4.6 Ninja Star Rating
- Build credit while building savings
- No hard credit pull
- Automatic payments
- Reports to three main credit bureaus
Self is a lender that offers an easy and responsible way for borrowers to establish payment history and build credit, while building savings, through a credit builder account. It’s a small installment loan, but the money is yours (minus interest and fees), and even securitized by a CD.
Start Building Your Credit Today!
*Credit Builder Accounts & Certificates of Deposit made/held by Lead Bank, Sunrise Banks, N.A., First Century Bank, N.A., each Member FDIC. Subject to credit approval.
Katapult Lending
4.4 Trustpilot Rating
- lease purchase plans
- Simple process
- No hidden fees
- No credit required
Katapult offers lease purchase plans and paths to ownership for consumers who typically don’t have many financing options. If you’re considering a large purchase but you don’t have great credit, then Katapult may be able to help. They offer solutions with no credit required, and no late fees.
No Minimum Credit Score Required
Yendo
4.4 Google Rating
- Vehicle-secured credit card
- Up to $10,000 in revolving credit
- Quick & easy pre approval
- Build credit with responsible usage
Yendo is the first vehicle secured credit card. This means you can still get approved for their credit card, even with a less-than-perfect credit score. They use the value of your car to help determine your credit limit. They offer credit limits up to $10,000 with no hard credit inquiry.
Must Meet Their Approval Criteria
Personal Loans
A personal loan is an installment loan available to borrowers with almost any credit score. However, the lowest terms, higher loan amounts, and most convenient repayment terms are reserved for borrowers with a credit history in good standing. If you need a 500 credit score loan, check out the rest of the resources offered by CreditNinja.
Personal Credit Builder Loan
There are also bad credit personal loans, which is funding explicitly designed for consumers with a poor credit score. When used responsibly, this type of funding can act as a credit builder loan and help consumers improve their credit scores. All you have to do is pay back the loan in full and on time!
Bank Loans
Bank loans are a traditional type of funding commonly used for debt consolidation or large purchases. Since banks are conventional lenders, they typically only work with consumers with excellent credit. So, if you’re looking for a bank loan with a 505 credit score, you may want to work on improving your credit before applying.
Credit Union Loans
Borrowers with poor credit scores may have more luck finding approval for a loan with a credit union over a bank. Unlike banks, credit unions are nonprofit organizations owned and operated by their members. In order to get a personal loan through a credit union, you will have to become a member.
Secured vs. Unsecured Credit Card
You may also choose to opt out of getting a loan altogether and cover your expenses with a credit card instead. Traditional credit cards, otherwise known as unsecured credit cards, operate as a revolving line of credit where the borrower’s credit limit is renewed at the end of each billing cycle. While this system can seem convenient on the surface, it’s also extremely easy to slip into bad habits and rack up unaffordable debt.
Secured Credit Card
To avoid the risk of credit card debt, credit card applicants with bad credit scores may want to look into a secured credit card account. With secured credit cards, borrowers prepay their credit limit at the beginning of their billing cycle. That way, they can benefit from the increase in their available credit without having to deal with owing more than they can afford.
Car Loans
Consumers can use car loans if they are specifically looking to purchase a vehicle. Although, similar to other types of loans, better rates and terms are typically only available for borrowers with a good or average credit score. So, if you’re looking to buy a car with bad credit, you should be prepared to shop around and compare offers so you can find the best deal.
Payday Loans
Borrowers with unfavorable credit scores often seek out payday loans because they are so easy to get approved for. However, what a lot of borrowers don’t realize is that payday loans are an extremely expensive way to borrow money. In fact, according to the Financial Health Network, the majority of Americans will pay about $520 in fees just to borrow $375 over five months.1 So, unless you can repay your full balance within about fourteen days or less, you should probably steer clear of payday loans.
Products to Help Improve a 505 Credit Score
Credit Counseling
If you have no idea where to start when it comes to keeping track of your credit accounts, credit reports or improving your credit scores, a credit repair company may be able to help you out. Check out a brief overview of some free and paid credit counseling services available throughout the United States below:
| Organization | Services Offered | Fees? | Contact Info |
|---|---|---|---|
| National Foundation for Credit Counseling | Mortgage, student loan, bankruptcy counseling | Paid services |
Website: NFCC.org
Phone: 800-388-2227 |
| Financial Counseling Association of America | Debt and credit counseling | Free |
Website: FCAA.org
Phone: 800-450-1794 |
| American Consumer Credit Counseling | Credit and budget counseling, debt management plans (DMPs) | Counseling: Free, DMPs: Paid |
Website: Consumercredit.com
Phone 800-769-3571 |
| GreenPath Financial Wellness | Debt and budget counseling, bankruptcy counseling, DMPs | Counseling: Free, Other services: Paid |
Website: Greenpath.com
Phone: 800-550-1961 |
| Money Management International | 24/7 counseling online or over the phone, DMPs | Counseling: Free, DMPs: Paid |
Website: Moneymanagement.org
Phone: 866-889-9347 |
Disclaimer: Please note that the information provided in the table above is a general comparison and may not reflect the most current services, fees, or contact details for each organization. For the most accurate and up-to-date information, it is recommended to directly consult the official websites or contact the respective credit counseling services.
Instant Credit-Boosting For Consumers With a Poor Credit Score
- Experian Boost – records on-time payments for commonly unreported accounts, such as rent or subscription services
- Grow Credit – issues users a special MasterCard to help improve their credit utilization rate
- TurboTenant – records rent payments for your credit reports
Budgeting
On your journey towards improving your credit score, you’ll want to keep your recurring payments and financial responsibilities on track. You can keep this record on your own using a notebook or spreadsheet on your computer, or you can take the digital route and try a budgeting app. Some popular apps you may consider are:
- EveryDollar
- Goodbudget
- YNAB (You Need a Budget)
- Honeydue
- PocketGuard
- Empower Personal Wealth
Credit Monitoring
It may be worth using a credit monitoring service to ensure your credit stays on track while you work on improvement. There are both free and paid services that can review your credit reports and inform you of any suspicious activity. That way, you won’t have to worry about situations like identity theft or credit fraud going unchecked and bringing down your score for no reason.
Check Your Credit Reports Often
While using a credit monitoring service can be helpful, it’s also important to check your credit report on your own as often as you can. You may access a free credit report from each of the three credit bureaus at least once a year, or you can pull a soft credit check on your own as often as you like. By checking your reports regularly, you can also see how your current habits are affecting your credit score, allowing you to keep up the good financial habits and ditch the bad ones.
Benefits of Improving Your 505 Credit Score
There are essentially no negative consequences to improving your credit history. In fact, consumers can enjoy tons of benefits when they improve their credit scores. Some perks you may look forward to are:
- More loan options – with a higher score, you won’t have to stress about meeting minimum credit score requirements!
- Easy access to cash – lenders will often send pre-approval opportunities to consumers with good credit, which means a shorter application process.
- Better deals – since you’re not as much of a lending risk with a good credit score, lenders are more likely to approve you for lower interest rates and more convenient loan terms.
How To Improve Your 505 Credit Score
Familiarize Yourself With Your Credit History
To start improving a 505 credit score, it’s essential to understand how your score got there in the first place. That’s where your credit reports come in. A credit report is an official record containing data on your personal finance habits and accounts. This data comes directly from your lenders and creditors, most of whom report directly to the three major credit bureaus: Experian, Equifax, and TransUnion.
Data from five different categories are compiled on your credit report, which work together to determine your credit score. Those categories are:
- Payment history – makes up 35% of your score
- Debts – makes up 30% of your score
- Length of credit history – makes up 15% of your score
- Mix of credit accounts – makes up 10% of your score
- New credit account inquiries – makes up 10% of your score
Make Your Due Payments On Time
Since payment history has the biggest impact on consumer credit scores, paying all your bills and loans on time is crucial for anybody who wants to see improvement. According to a survey from Lists With Clever, the top reason why consumers missed a due credit card payment is because they simply forgot.2 If that sounds like you, you may want to consider signing up for automatic payments. With autopay, your due payments will be automatically deducted from your checking account, allowing you to keep up with your various payments without having to remember to submit them manually.
Hold Off On New Loans and Credit Cards
Try to hold off on applying for new loans or credit cards while you are working on improving your credit scores. Instead of gravitating towards applying for new credit, ask yourself if there are other options available when you find yourself looking for extra cash. Consider solutions like:
- Using funds from your savings account
- Getting a part-time job for a while to earn extra income
- Try a no-spend challenge to free up extra room in your existing budget
FAQs About 505 Credit Scores
Can I still qualify for a secured credit card, and how does it affect my average credit score compared to a personal loan?
Yes, you can qualify for a secured credit card even with a 505 credit score, which can be a more accessible option than a personal loan. Using secured credit cards responsibly and paying the balance on time can positively affect your average credit score by building a history of on-time payments.
Are there specific strategies for dealing with collections accounts to improve a 505 credit score?
Prioritize negotiating with creditors to remove collections accounts from your credit report in exchange for payment, a practice known as “pay for delete.” This can directly improve your credit score by removing negative marks.
How does co-signing affect my ability to improve my 505 credit score?
Having a co-signer with a good credit score can improve your chances of being approved for loans and credit cards, which you can then use to build a positive credit history. However, ensure timely payments to avoid negatively impacting both you and your co-signer’s credit scores.
What Interest Rate Can I Get With a 505 Credit Score?
While there are different state laws that regulate interest rates throughout the country, finding low-interest rates on personal loan products may not be possible with a 505 credit score. Instead, consumers with bad credit scores may have to deal with higher rates until they can improve their credit.
Can I Buy a House With a 505 Credit Score?
Buying a house when you have a low credit score may be difficult as mortgage lenders are unlikely to work with high-credit-risk consumers. While a mortgage is typically considered a good type of credit account by most major credit bureaus, renting can come with other benefits, such as:
- Flexibility: If you decide to relocate, you can just wait for your lease to end and move, no strings attached! Or, if you get a higher-paying job and have to move, you can most likely break your lease for a fee and leave whenever you like.
- Less money upfront: To buy a home, you will have to contribute a down payment, which can be thousands of dollars or more. Landlords, on the other hand, may just require a security deposit, which is usually one month’s rent upfront.
Depending on your financial situation, it may be more affordable to rent your home while you work on improving your credit report and look into buying a home once you have a higher credit score.
