How and Where To Get a 500 Credit Score Loan

Where can you find a loan if you have a credit score of 500? 

While many lenders require borrowers to have fair, good, or excellent credit, loan options exist for people with poor credit, which is a FICO score of 580 or less. But getting approved can be a challenge and getting a competitive rate, even harder. 

We’ll cover the best loan types for bad credit with reasonable rates, plus tips to improve your chances of getting approved for a loan with bad credit. 

500 credit score loan options

The lower your credit score, the fewer loan options you have. However, borrowers with 500 credit scores will have a better chance of approval with the following loan types:

• Installment loans for bad credit: Some lenders offer no-credit-check or soft credit check loans that cater to people with bad credit. These loans can have high APRs — up to 200% or higher, depending on the lender and your situation. But they can be an excellent alternative to short-term, small-amount, high-fee loans (like payday loans), especially since loan amounts are often available in the thousands and loan terms span years (which can translate to more affordable payments). Lenders offering such loans include OppLoans and NetCredit. 
• Secured personal loans: Secured personal loans require you to pledge collateral, such as a vehicle, savings account, collectible, piece of jewelry, or even the fixtures in your home. If you default, the lender can take ownership of your collateral and use it to recover the amount you owe.
• Cosigned loans: A cosigned loan involves you applying with someone else who has good credit — the cosigner — who promises to pay off the loan if you can’t.
• Loans with a co-borrower: A co-borrower refers to a person who applies for a loan with you. Unlike a cosigner, co-borrowers have equal access to the loan funds.
• Payday alternative loans (PALs): PALs are small, unsecured loans offered through federal credit unions. Loan amounts range up to $2,000, have terms from 1 to 12 months, and are designed to be more affordable than payday loans.
• Credit-builder loans (CBLs): CBLs are designed to help you build credit, but don’t offer funds upfront. Instead, a lender moves your loan funds into a locked savings account. You then make installment payments over a term, often 6 to 24 months. You either receive the principal in installments every time you make a payment, or you get the entire loan amount once payments are complete. Payments are reported to the major consumer credit bureaus.

Lenders for bad credit

When you’re looking to get a loan with bad credit, you’ll have a higher likelihood of success if you apply with lenders that cater to borrowers with low credit scores or if you apply with a cosigner with good credit or a co-borrower with good credit. To quickly find out which lenders you’re most likely to qualify with, prequalify first. You can do this on many lender websites or you can check prequalified rates below.

Prequalification doesn't hurt your credit, but it’s not a loan offer. Note that once you complete a full loan application, the lender will conduct a hard credit check, which could temporarily ding your credit score.

Here are a few lenders that might approve you with a FICO score in the mid 500s:

If you’re interested in a loan with Upstart, you may need to apply directly on the lender’s website if your score is below 620.

How does your credit score impact personal loan options?

Lenders often set a minimum credit score to qualify for a personal loan. For example, U.S. Bank requires a minimum score of 660 for existing customers and 720 for everyone else. 

'As a result, your credit score plays a key role in the personal loans that are available to you. That said, not all lenders require a specific minimum credit score. Some, like OneMain Financial, are more lenient and consider your score without drawing a hard line on where it needs to sit.

How to improve your loan application

Along with your credit score, lenders consider other factors during the loan application process such as your annual income, debt-to-income ratio (DTI), income stability, payment history, credit account history, and more. 

You can strengthen your application by showing that you’re financially responsible and stable in various areas, or by applying with someone who is.

For example, if you’ve made credit mistakes in the past but have made all of your payments on time for the last year, that’s a good sign for potential lenders. Other good signs are having a steady income source and a DTI below 35%. But even so, you’re most likely to get approved if you can apply with someone else who has good credit — either as a co-borrower or cosigner.

Just know that if you can’t afford the payments, that person’s credit — and possibly your relationship with them — will suffer. In other words, don’t take out any loan you can’t afford to repay, especially if it would put someone else’s finances at risk.

How to rebuild your credit

It can take time to improve your credit score and history, but there are a couple of quick-win ways to boost your score:

• Use a service that reports rent and utility payments to the credit bureaus, like Experian Boost (free) and CreditRentBoost (fee-based).
• Become an authorized user on someone’s else’s credit card with a high available credit limit. This one is best if your own credit utilization is high. As an authorized user, the available credit on the card will increase your available credit, thereby decreasing your credit utilization — which can contribute up to 30% to your credit score. 

When it comes to building (and keeping) good credit long term, employ these tried and true strategies:

• Don’t rely on credit, use it as a tool to improve your score by paying off new charges in full every month.
• Make all payments on time.
• Pay down your credit card balances, or consolidate your debt.
• Leave revolving credit accounts open (but use them sparingly and/or pay them off in full each month).
• Minimize your debt-to-income ratio by increasing your income and/or paying off debt.
• Limit hard credit inquiries by prequalifying with multiple lenders before applying for a loan.
• Build credit with a secured credit card and CBL.

As you work on building credit, keep tabs on your scores and reports. Seeing the results of your actions can help keep you motivated and on track.

Related: How To Build Credit

Read More:

• What Are the Requirements for a Personal Loan?
• How Long Does It Take To Get a Personal Loan?
• How Much of a Personal Loan Can I Borrow?
• Types of Bad Credit Loans
• Best Personal Loans for Fair Credit
• Best Banks for Personal Loans
• Best Credit Unions for Personal Loans