How to get a loan with a 500 credit score

A low credit score may not keep you from getting a personal loan, but you’ll likely pay higher interest

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It can be hard to find a personal loan when you have a 500 credit score, but it’s not impossible. Here’s what you need to know. (Shutterstock)

Credit scores can seem a bit mysterious if you don’t know what your score means, so let’s break down how some of this works. Credit-scoring models put a 500 credit score in the poor range. The closer you are to a good credit score (a FICO Score of 670 to 739), the more likely you are to qualify for better rates on credit products. 

But having a 500 credit score doesn’t necessarily put you out of the running for a personal loan. Here’s how to get a loan with a 500 credit score.

You can use Credible to compare personal loan rates from various lenders, all in one place.

Can you get a personal loan with a 500 credit score?

It’s possible to get a personal loan if you have a 500 credit score, but there are caveats to be aware of. First, not all lenders will loan money to borrowers with a credit score of 500. Some lenders specialize in bad credit loans, but if you’re approved you probably won’t get the best interest rate a lender has to offer.

The reason it’s harder to find a loan with lower interest rates when you have bad credit is because your credit score indicates to a lender how you manage money and how likely you are to pay them back on time. The lower your credit score is, the more lenders see you as a credit risk.  

If a lender does work with someone who has bad credit, it’ll often make up for this risk by charging a higher interest rate, adding extra fees to the loan, or requiring collateral to secure the loan. 

Is a 500 credit score good?

A 500 credit score is considered a poor credit score. The following factors show up on your credit report and can affect your score:

  • Age of credit accounts — How long you’ve had current credit accounts open plays a role in determining your credit score. Lenders like to see a history of managing credit accounts over a long period of time.
  • Credit utilization — Your credit utilization ratio measures how much of your overall available credit you’re using. Keeping this ratio low helps your credit score.
  • Payment history — Making late payments hurts your credit score, and making consistent, on-time payments helps boost your score.
  • Open credit accounts — Be careful when deciding whether to close a credit account. Even if you’re no longer using an account, closing it can raise your credit utilization ratio and shorten the average age of your credit accounts, which can affect your score.

Where to get a loan with a 500 credit score

If you’re looking for a 500 credit score loan, you have a few options.

Online lenders

Some online lenders have lower credit score requirements than traditional lenders. You can usually get prequalified for a loan through an online lender. This involves a soft credit pull, so you can check your potential interest rates before officially applying (which is when your credit score can take a hit). 

Credible makes it easy to see your prequalified personal loan rates, without affecting your credit score.

Banks and credit unions 

Credit unions are often more flexible than banks when it comes to lending requirements, since they’re not-for-profit financial institutions. Credit unions serve their members, while banks are looking to turn a profit. You usually need to be a member of a credit union in order to apply for a loan from one.

Many banks require you to have good to excellent credit to qualify for a personal loan. But some banks offer loans to those with lower credit scores, especially community banks where the borrowers already have an established relationship with the bank.  

How to get a personal loan with a 500 credit score

If you have a 500 credit score, these are generally the steps you’ll take to get a personal loan

  • Review applicant requirements. Many lenders advertise the credit score you need to have to qualify for a loan. Before applying for a loan, see if you can find out the lender’s credit score requirements first so you know if you need to rule them out.
  • Ask about fees. Lenders try to lower their risk level with borrowers who have bad credit scores by charging them more fees on top of higher interest rates. Confirm what type of fees each lender you’re considering charges and how these fees will affect your overall cost of borrowing.
  • Prequalify and compare potential loan offers. When you prequalify, your credit score won’t be affected and you can get a general idea of how much a lender will be willing to lend you before you officially apply for a loan. You can prequalify with multiple lenders and compare the different potential offers to see who’s likely to offer you the best loan terms, interest rates, and fees for your situation.
  • Apply. Once you review your prequalification offers, choose which lender you want to officially apply with and submit your application.

If you’re ready to apply for a personal loan, Credible makes it easy to compare personal loan rates from various lenders to find one that meets your needs.

Personal loan rates for poor credit

Interest rates vary from lender to lender, but let’s look at an example of how your credit score can affect the interest rates a lender offers you. 

A fairly average interest rate on a personal loan is 4%, but overall interest rates can go as high as 36%.

If you have a good credit score you’re more likely to qualify for that lower rate of 4%. If you have a 500 credit score, you’ll likely end up on the higher end of that range, say 25%. 

Here’s an example of what a $15,000 loan with a five-year repayment term could cost with these interest rates:

  • 4% interest rate: Your monthly payment would be $276, and you’d pay $1,575 in interest over the life of the loan.
  • 25% interest rate: Your monthly payment would be $440, and you’d pay $11,416 in interest over the life of the loan — nearly $10,000 more in interest charges than the loan with the lower rate.

You can use Credible’s personal loan calculator to see how much your monthly payment might be based on different interest rates, loan amounts, and loan terms.