The dreaded 500 credit score. If your credit score is in the 500s, you probably already have a good idea what it means. It certainly isn’t good. However, it is not the end of the world either. Here are the myths and facts about your 500 credit score.

500 Credit Score Myth: If your credit score is 500 to 600, you can’t get a loan or a credit card.

500 Credit Score Fact:

It will be difficult for you to get a loan if your credit score is in the 500s but not impossible. In fact, there are lenders who exist specifically to find loans for poor credit risks. These subprime lenders are in short supply since the subprime mortgage crisis of the last decade, but it is still possible to find a loan with a bad credit rating if you’re willing to make the high interest payments. Just make sure that you are actually able to make those payments. You can also always get a secured credit card, where you guarantee the money you borrow with an initial deposit, which then becomes your credit limit.

500 Credit Score Myth: For your credit score to be as low as 500, you have to have declared bankruptcy.

500 Credit Score Fact:

This is not true. There are a lot of reasons your score may have dipped this low, including defaulting on multiple credit cards, excessive late payments, or an excessive debt to income ratio. In reality, declaring bankruptcy may actually help your credit score, because once you have taken the hit from the bankruptcy, you’ll be debt free and able to build up credit again.

500 Credit Score Myth: If your credit score is this low, you might as well give up.

500 Credit Score Fact:

This is not true either. You can always improve your credit score, whether it’s by something as drastic as declaring bankruptcy or something as simple as adjusting your budget. As make good on your debts, begin paying off your loans, adjust your credit card spending and make all your payments on time, you’ll see your credit score start to rise.

500 Credit Score Myth: Lenders charge higher interest rates to those with lower credit scores to punish them.

500 Credit Score Fact:

Lenders aren’t trying to teach you a lesson in responsible borrowing, to them it’s basic math. They know that X percentage of people in a certain risk group default. They also know that they will have to charge everyone in that group Y amount of interest so that when that X percentage defaults, the amount that the lender loses will be covered by the Y amount of interest they have charged.

In other words, when you are in a high risk group, you are paying for all the people who default in the form of higher interest. It’s not fair, but it’s the way things work, which is why it’s so important for you to be responsible and get yourself out of that high risk credit category.

Learn about what a 600 credit score means.

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