What a 505 Credit Score Means for You
505 credit score! Sarah stared at her phone screen in disbelief. The credit monitoring app showed that bright red number: 505. After losing her job, she struggled to pay bills, and her credit took a big hit.
She wondered, "What does this mean for my future?"
If your credit score is around 500, you might be asking the same thing.
Let's break down what a 505 credit score really means and how you can start to improve it.
What Is a 505 Credit Score?
Think about walking into a bank to ask for a loan or a credit card. You might feel hopeful, but then the lender checks your credit report and sees a score of 505. Just by looking at their face, you can tell the news won't be good.
A 505 credit score is considered "very poor" by most credit scoring systems, like FICO and VantageScore. These scores usually range from 300 to 850. Anything below 580 is seen as a high risk by lenders.
📉 According to Experian, one of the three major credit bureaus, a score below 580 is in the lowest category and may lead to loan denials or very high interest rates.
What can cause a score like 505?
People with this score often have a history of:
- Late or missed payments
- Accounts sent to collections
- High credit card balances
- A short credit history
- Bankruptcy or defaults
Important Note: Having a low score doesn't mean you're bad with money. Sometimes, life throws challenges our way, like losing a job or facing unexpected medical bills.
The good news is that a 505 credit score isn't permanent. With time and good financial habits, you can improve it.
Think of this score as a warning light. It shows you need to make some changes, but it also gives you a chance to take control of your financial future.
Is a 505 Credit Score Good or Bad?
As we said, a 505 credit score is in the "poor" category. So, you now know it's not good.
Credit scores are generally divided into these ranges, according to FICO:
- Excellent: 800-850
- Very Good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 300-579
With a score of 505, you are in the lower part of the "poor" range. About 19% of people with this score have a history of being more than 30 days late on a payment in the last 10 years.
How a 505 Credit Score Affects Your Life
Mark, a 32-year-old electrician, knows what it's like to have a 505 credit score. "It feels like a dark cloud hanging over your finances," he said. "Everything from renting an apartment to getting a new phone becomes much harder."
Here are some of the challenges you might face with a 505 credit score:
Loans and Credit Cards
Getting traditional loans with a 505 credit score can be very difficult. When John tried to get a car loan with his 505 score, he experienced:
- Interest rates 7-15% higher than those offered to people with good credit
- Loan offers that were smaller than what he needed
- Requirements for larger down payments
- The need for someone to co-sign the loan
According to data from LendingTree, borrowers with scores below 580 may pay interest rates up to 16% higher on auto loans compared to those with excellent credit.
To give you figures, for a $20,000 car loan over 60 months, this could mean paying an extra $9,000 in interest.
Average Auto Loan APRs by Credit Score Range (2024)
Getting approved for most traditional credit cards is also unlikely with a 505 credit score because they are unsecured debt. You might have to pay extra fees or put down a deposit for certain cards.
505 Credit Score Housing Challenges
Finding a place to live with a 505 credit score can be tough :
- Many landlords have minimum credit score requirements above 600
- Security deposits might be much higher than usual
- You might need someone to co-sign your lease
- Getting a mortgage becomes very difficult
While it might be possible to get an FHA loan with a score as low as 500, you would likely need a larger down payment.
Recommended Story: Lisa’s Journey – How She Went from Poor Credit to Homeownership
505 Credit Score Employment Implications
Some employers check credit reports as part of their hiring process (though they usually don't see the actual score). While a 505 score isn't directly visible, the negative items causing that score might be.
What Causes a 505 Credit Score?
Having a 505 credit score just doesn’t happen; it’s usually the result of a few key factors related to how you’ve managed credit in the past.
The most common reasons include :
Payment History (35% of FICO Score)
Late payments have the biggest impact. Late payments have the biggest impact on your score. According to FICO, a single 30-day late payment can drop your score by up to 110 points, depending on your starting score.
Credit Utilization (30% of FICO Score)
This is how much of your available credit you're using. It's best to keep this below 30%. If you have $10,000 in credit limits and $9,000 in balances, your utilization is 90% – far above the recommended 30% maximum. For people with a 505 score, the average is much higher, around 94%.
Derogatory Marks
These are serious negative items like collections accounts, charge-offs, repossessions, bankruptcies, and foreclosures Each can lower your score by 100+ points and remain on your credit report for 7-10 years.
Limited Credit History
If you haven't had credit for very long, you might have a lower score simply because there isn't much information for scoring models to use.
Public Records
Bankruptcies and other public records like liens or judgments can seriously hurt your credit score.
It's important to check your credit report to understand the specific reasons behind your 505 credit score. Once you know what's causing the low score, you can start taking steps to improve it.
Can You Get a Loan With a 505 Credit Score?
Yes, it's possible, but there are significant limitations.
Lisa, a single mom, was able to get a loan with her 505 credit score, but not from a regular bank. "The big banks wouldn't even look at my application," she said. "I had to find lenders who work with people with poor credit."
Your options might include:
- Secured Credit Cards: These cards require a cash deposit that acts as your credit limit. Some popular options are the Capital One Secured Mastercard and the Discover it® Secured Card, which report to all three credit bureaus to help you build credit.
- Credit-Builder Loans: Some credit unions and online lenders offer these unique loans. The money you borrow is put into a locked savings account. You make payments over time, and when the loan is paid off, you get the money back with the interest you earned.
- FHA Home Loans: If you're looking to buy a home, FHA loans might approve borrowers with scores as low as 500. However, you'll likely need a larger down payment, typically 10% instead of the 3.5% for those with scores above 580.
- High-Interest Personal Loans: Some online lenders like rise credit specialize in working with people who have poor credit. However, be prepared for very high interest rates compared to those with good credit.
7 Steps to Boost Your 505 Credit Score
When one of our clients from ASAP, Carlos saw his 505 credit score, he decided to take action. Within a year, he raised it to 620.
Here's how you can too :
1. Know Your Current Situation
Get your free credit reports from annualcreditreport.com and see exactly what's hurting your score.
Look for:
- Late or missed payments
- High credit card balances
- Collections accounts
- Errors that need disputing
Understanding these details is crucial because they are the primary factors influencing your credit score, and identifying them is the first step toward creating a targeted plan to address the negative marks and begin improving your financial standing.
2. Pay Bills On Time, Every Time
Set up automatic payments for at least the minimum amount due. Payment history is the most important factor in your credit score.
3. Reduce High Credit Card Balances
Focus on getting your credit utilization below 30%. If you have multiple cards, consider the "debt avalanche" method: pay the minimum on all cards but put extra money towards the card with the highest interest rate first.
4. Consider a Secured Credit Card
Start rebuilding your credit with a secured card. Use it for small purchases and pay it off in full each month. Responsible use can help improve your score.
Here’s one strategy we used for James: James started rebuilding his credit with a $200 secured card. "I just used it for gas each month and paid it off immediately," he said. After eight months of responsible use, his score had improved by 45 points.
5. Become an Authorized User
If a trusted family member with good credit is willing, ask to be added as an authorized user on their credit card. Their positive payment history can help your score.
6. Explore Credit-Boosting Programs
Look into programs like Experian Boost, which may allow you to get credit for paying bills like utilities and phone services on time.
7. Be Patient and Consistent:
Improving your credit score takes time. It can take many months to see significant progress, so stick with good habits. According to credit expert John Ulzheimer, formerly of FICO and Equifax, "It takes about 12 to 24 months to rebuild enough credit history to increase your credit score significantly."
Successfully boosting a 505 credit score is a journey requiring patience and consistent effort, as highlighted by Carlos's progress. However, if you do all of these things and still see no significant improvement, you might be missing something. In such cases, it's wise to take it to the hands of the experts, like ASAP Credit Repair, who have the specialized knowledge to help you navigate challenges and accelerate your path to a healthier credit score.
You might be interested: Effective Strategies to Repair Your Credit Score Quickly.
From 505 to 600: What to Expect
Moving from a 505 to a 600 credit score usually takes time and consistent effort, often between 12 to 18 months. However, the exact timeline depends on what caused your low score.
- High credit card balances: You might see improvement in 3-6 months if you aggressively pay them down.
- Recent late payments: It will likely take 6-12 months of perfect payment history to see a difference.
- Major negative items like bankruptcy: These can take 7-10 years to fall off your report.
While there's no single "ideal" timeframe for everyone, consistently making positive financial choices and directly addressing the issues on your credit report over several months to a couple of years is the most realistic expectation for reaching the 600 range.
Life With a 600 Credit Score
While a 600 score is still considered "fair," it opens up more opportunities than a 505 score. Reaching this level shows lenders and creditors that you are becoming a less risky borrower, which can translate into tangible benefits in your daily life. You might start to see:
- Potentially Lower Interest Rates: Although you won't qualify for the absolute best rates, a 600 score can help you secure loans and credit cards with interest rates that are lower than those offered to individuals with very poor credit, saving you money over time.
- Auto loan interest rates may be 5-8% lower
- More Rental Housing Options: Many landlords check credit scores, and a 600 score can make it easier to pass rental applications and secure housing.
- Better Terms on Utilities and Services: You might be less likely to be required to pay large security deposits for utilities like electricity or cell phone service.
- Better Credit Card offers: While not guaranteed, you'll have a much better chance of being approved for personal loans, car loans, and even some starter credit cards compared to having a score in the low 500s.
- A Foundation for Further Improvement: A 600 score is a solid stepping stone. Maintaining good habits at this level makes it much more realistic to aim for scores in the good or excellent range in the future.
Having a fair credit score can give you access to significantly more financial products compared to having a poor score. That's precisely why we advocate so strongly for helping our clients boost their scores.
Common Questions About a 505 Credit Score
Before wrapping this content, let’s address some common questions people have when facing a 505 credit score:
Can You Do Anything With a 505 Credit Score?
Yes! While your options are limited, you can still:
- Get a secured credit card
- Qualify for some specialized auto loans
- Get a credit-builder loan
- Start the process of rebuilding your credit
How Fast Can You Raise Your Score From 505?
With dedicated effort, you might see improvements in as little as 30-60 days, especially if you can significantly reduce credit card balances or correct errors. According to a study by LendingTree, 40% of people who actively worked on their credit saw score increases of 30+ points within three months.
Will Paying Off Collections Improve a 505 Score?
It depends on the credit scoring model. Newer FICO models might not count paid collections, but older models do. However, paying off collections can still improve your chances with lenders who manually review your credit report. A faster and more significant impact on a 505 score, focus on getting the collection removed from your credit report.
If the collection entry contains any inaccuracies or cannot be fully verified by the collection agency or original creditor, you have the right to dispute it with the credit bureaus. Successfully disputing and having a collection removed can have a much more direct and positive effect on raising your credit score than simply paying it off, as it eliminates the negative mark entirely.
Final Thoughts: Your 505 Score Is Temporary
Remember Sarah? Just six months after finding out her score was 505, she had already raised it to 560 by getting a secured card and setting up automatic payments.
"I'm not where I want to be yet," she said, "but seeing that number go up keeps me going."
Your 505 credit score doesn't have to define your financial future. It's a temporary situation that can get better with consistent effort and smart money habits. The journey to good credit takes time, but many people successfully make this climb every year.
Take the first step today. Get your credit reports, create a plan to address the issues affecting your score, and commit to the habits that will build your creditworthiness over time. A year from now, you'll be glad you started.
Disclaimer: This article provides general information and should not be considered financial advice. Always consult with a qualified financial professional for advice specific to your situation.