June 9th, 2009, Written By: Kerri Randall
When your credit score is sitting at 500, you can probably tell why. While 500 is not the absolute lowest score you could have, you are in the same category as people with the lowest, which is 350. Your credit is rated as bad, poor, or just plain ugly.
You probably have some major negative marks on your history, such as a bankruptcy, home foreclosure, or default on a loan. These negative marks are likely to be recent, and the amount of these marks far outweighs any positive history you might have. Paying off your credit card debt is great and extremely helpful to your credit score, but a foreclosure will weigh it back down like a ton of bricks.
Such a low score is likely to be caused by serious financial problems, and you’re probably well aware of them. If you’re having trouble paying your bills, your credit will take a hit. Consistent late payments will bring it down, and the larger consequences like bankruptcy or collections will send it through the floor. This will make it harder for you to get approved for loans or other new lines of credit. Even if you do manage to get approval, the terms will be brutal. Your credit limit is likely to be low, and your interest rates will be outrageously high.
So what can you do to fix it? At this stage, some professional finance counseling might be a good idea to help you find a good starting point on your personal debt. Aside from that, the simplest answer is to start establishing good credit habits right away. Pay your bills on time, and try to focus on paying down smaller debts first to start creating a positive history. Work at keeping your balances low. Ideally, you want to use no more than 30% of your available credit.
The last thing you can do is to wait. The more time you put between the present and your negative history, the more your credit will improve. Get your credit habits in check in the meantime; then, once you’re back on the right track, you’ll be more likely to stay there.
Categories: Establish and Rebuild Credit