Credit cards for a 550 credit score are hard to find but not impossible. A 550 credit score sits at the lower end of the spectrum, well below the average credit score, limiting your options. It will make it difficult to get a personal loan or credit card but don’t lose hope yet. There are lenders who specialize in borrowers with poor credit.
Let’s go over what you can expect with a poor score and how you can increase your chances of qualifying for the personal loan or card you want.
Decoding credit scores
Credit scores are a reflection of your financial behavior. Financial institutions send data to the three major credit bureaus – Experian, Equifax, and TransUnion. The bureaus put this information in your credit report and then run it through various scoring models and your score comes out the other end.
Your credit score tells lenders how likely you are to repay what you borrow. The higher your score the less risk you are. A 550 credit score is considered high risk. It indicates a past of late or missed payments, defaults, excessive debt levels, or a limited credit history. It will be difficult to secure loans or cards with decent terms. The good news is that scores can be changed.
Read more about your credit score!
Personal loans for credit scores under 550
Qualifying for a 550 credit score loan can be challenging, as many lenders view you as high-risk. Your best bet is to go to an alternative lender. Credit unions, online lenders, and loan marketplaces tend to offer personal loans with more lenient requirements. They may place more emphasis on your income, employment stability, housing situation, or debt-to-income ratio than on your score. The best personal loans for bad credit will have competitive interest rates and flexible terms.
Be aware that lenders who do not consider your credit score at all usually charge more in interest and fees to make up for the risk.
How to get a loan with bad credit
Securing installment loans for a 550 credit score can be tough, but it is indeed possible. Most lenders want a minimum score between 600 and 650, but not all. If you have a low rating, there are steps you can take to find lenders more likely to approve you.
Check your credit score
Most lenders have a minimum credit score requirement. Start by checking your score so you know where you stand and only apply for loans where you’re above the minimum.
Research lenders
Research more than one lender to find the best deal. Not all lenders have the same requirements or will offer the same repayment terms. Look for alternative lenders with more lenient requirements. Find out about their terms, conditions, and APR (annual percentage rate) too. Make sure to filter out any disreputable lenders.
Prequalify before you apply
Once you’ve narrowed down the list of lenders, try to prequalify. Prequalifying does not guarantee you’ll be approved, but it does give you an idea of your odds. It lets you see potential loan offers, including your monthly payments, interest rates, fees, loan terms, and loan amounts, all without impacting your score. This is because when you prequalify, the lender will do a soft inquiry to check your finances. Only hard inquiries hurt your score. Prequalify and compare loan offers to find the best one for you and apply for that loan.
Put up collateral
If you don’t prequalify for any loans or the fees are too high, consider a secured loan. Secured loans require collateral like a house, car, or savings account. Your asset will be at risk if you default, but you are more likely to receive favorable loan terms.
Visit a credit union or local bank
Credit unions and local banks tend to have more flexible lending criteria compared to big banks. They might be more willing to take a holistic look at your finances and consider more than your score. A credit union may require you to be a member for at least a month before you apply. Overall, it does help to have an existing relationship with a community institution.
Borrow from friends and family
A family member or friend may be willing to lend you money at a more favorable rate than a traditional lender. Make sure to put the loan agreement in writing and include what would happen if you fail to repay as promised so as to avoid any strained relationships.
Find a co-signer
Ask a trusted friend or family member with a good credit score to co-sign the loan with you. This can make it easier to qualify for a loan with good terms. The catch is they have to pay if you don’t.
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Credit cards for 550 credit scores
A 550 credit score is bad, but you can still get a card. Certain cards are designed with lower ratings in mind, making them more accessible to everyone.
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Lots of people can’t afford a secured card. If that’s you, don’t worry; unsecured credit cards for a 550 credit score do exist, though they come with higher interest rates and additional fees.
Secured credit cards
A secured credit card typically requires a security deposit – fully refundable – which becomes your credit limit. The security deposit serves as collateral in case you close your account without paying what you owe. Secured cards are easy to be approved for and are an effective tool for improving ratings, as many issuers report payments.
Store credit cards
Store credit cards often have lenient credit score requirements and offer perks like discounts and rewards, making them a popular choice. While they can be easy to be approved for, they often come with higher interest rates, lower credit limits, and can only be used at the issuing store.
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Become an authorized user
Ask a family member or friend with a good score to add you to their account as an authorized user. Being an authorized means you can use their card without having to apply. Plus, your score will benefit from their responsible financial behavior.
Prequalify and compare
Before you settle on any credit card, it’s a good idea to shop around and prequalify. Prequalifying allows you to see what cards you may be eligible for without impacting your score. Many issuers let you prequalify in seconds online. Then, compare potential interest rates, fees, and rewards to choose the best card for you. Once you’ve selected your card, submit a formal application.
What you can get with a poor credit score is limited; however, with responsible use of one of these cards, your rating could improve and you can move on to better products.
Is 550 a bad credit score?
A 550 FICO score is considered deep subprime, according to the Consumer Financial Protection Bureau. A subprime score is anything below 580. Once you hit 580, you’re in the fair credit range. According to Experian, only 16% of consumers have a poor score.
“Bad” vs. “Good” credit scores
FICO breaks their scores down the following ranges:
- 800-850: Exceptional
- 740-799: Very good
- 670-739: Good
- 580-669: Fair
- 300-579: Poor
A FICO score above 670 is considered good. It indicates to lenders that they will get their money back. As low risk, these borrowers can access a wider range of products with lower APRs and more favorable terms.
A FICO score below 580 is considered bad. It signals to lenders a history of debt and not paying bills on time, making it difficult to secure personal loans or cards at advantageous terms. The good news is, nothing is stagnant. You can change your credit score with a little work.
Is your credit score too damaged to fix?
Average credit score by generation
Age isn’t a factor in calculating credit scores, but in general older consumers have a more positive credit history compared to younger ones.
| Generation | Average Credit Score |
|---|---|
| Generation Z (18-26) | 680 |
| Millennials (27-42) | 690 |
| Generation X (43-58) | 709 |
| Baby Boomers (59-77) | 745 |
| Silent Generation (78+) | 760 |
How credit scores impact loan terms
Your credit score plays a major role in determining the rates you qualify for. Lenders use your rating to assess how much of a risk you are. A higher score means lower risk and more favorable rates. A lower one indicates higher risk and it can make it very expensive to borrow money.
The average APR for a personal loan is 12.2%. If you have a good score, you can find APRs as low as 4.6%. The interest rate for a 550 credit score, though, can be as high as 36% plus additional fees. The lower your rating, the more interest you’ll pay.
550 credit score car loan rates
Auto loans will charge significantly higher rates. You can expect to pay APRs of 15% to 21% or more, depending on the lender, the size of the down payment, the value of the car, and other factors. Consider putting down a larger down payment or waiting until you’ve improved your score to get a better rate.
550 credit score home loan rates
Mortgage rates tend to fall between 8% to 12%. As an alternative, look into an FHA loan from the Federal Housing Administration. These loans are backed by the government and so offer competitive interest rates falling closer to 6% APR. They require a 10% down payment but if you bring your score up to 580, the down payment falls to only 3.5%.
How does missing payments affect your score?
How your credit score impacts loan and card options
Lenders use your three-digit rating to determine your eligibility for personal loans and credit cards and for what terms. Your score affects the interest rate, fees, credit limit, loan terms, and amounts you’ll receive. Scores of 500-600 are less than ideal.
If you’re wondering, “What can I get with a 550 credit score?” the answer largely depends on the type of card or loan you’re seeking. You’ll find it easier to get a secured loan. If you want an unsecured personal loan, expect to qualify for a smaller loan amount with less favorable terms. You will likely receive a higher interest rate and additional fees like an origination fee. This is because lenders tend to perceive borrowers with bad credit as high risk and compensate by imposing stricter loan terms.
The same is true with credit card issuers. The easiest cards to get with a low credit score are secured cards that require a deposit. Credit cards for a 550 credit score with no deposit are hard to come by. The ones you do find will have higher APRs, lower limits, and extra fees like a monthly maintenance fee or a one time processing fee. These fees and extra interest charges enable the issuer to be paid upfront, so they won’t lose any money if you default. This is also why applicants with poor scores are given lower credit limits. Defaulting on a $300 bill means the bank loses a lot less money than if you default on a $3,000 one.
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How to fix your credit score
The best way to get loans and cards with low rates is to improve your score. There are a number of ways you can do this. Some steps work fast while others need more time. Apply a mixture of the following options and take advantage of products designed to help. Over time, your score will rise.
Credit scores are calculated by weighing the following factors:
- Payment history
- Credit utilization
- Length of credit history
- Credit mix
- New inquiries
Review your credit report
Regularly review your credit report for inaccuracies and dispute any errors directly with the credit bureaus. Correcting these mistakes can lead to an immediate improvement in your score.
Always pay on time
You must pay your bills on time. On time payments are the most important factor in calculating your score. If you have past due accounts, bring them current and continue making timely payments. Set up automatic payments for recurring bills to avoid any human error.
Lower your balances
The amount you owe to creditors is the second biggest part of your score. Pay down high balances. There is no benefit to carrying a balance. It’s best to keep your credit utilization rate below 30% and then pay the bill in full each month. This way you’ll reduce the amount of debt you owe, raise your score, and avoid all interest charges.
Don’t close old credit accounts
The longer your credit history, the higher your score. It’s best not to close old credit card accounts since this will lower your score and increase your credit utilization ratio. If your old account has a high annual fee or you’re concerned about going into debt, then closing it might be worth it.
Increase your mix
Having various credit accounts as in installment loans (personal loans, auto loans, home equity loans) and revolving credit (credit cards) can positively affect your score. It shows lenders you can manage different types of borrowing responsibly. While a factor, it’s minor so don’t take on debt you can’t afford.
Apply strategically
Continually applying can hurt your rating due to numerous hard inquiries. Each application triggers a hard inquiry, which temporarily drops your credit score a few points. Submit applications only when you need to.
Open a secured credit card
Secured credit cards are typically used as a stepping stone. Make a refundable deposit of $200 or more in exchange of a line of credit. Use the card to make small purchases and pay the bill in full each month. The issuer will report your credit activity so you can build a positive payment history. Don’t use too much of your available credit, pay on time, and you’ll see your score increase.
Take out a credit builder loan
A credit builder loan is a small loan designed to help individuals improve their scores and save money at the same time. The money you borrow is held in an account while you make small monthly payments. Once the loan is paid off, the lender reports your positive payment history, and you will receive the loan amount.
Regularly read your credit reports
Review of your reports from all three national credit bureaus: Equifax, Experian, and TransUnion. You can get your credit report once a year for free from AnnualCreditReport.com. Use them to help pinpoint issues. It could be that you have outstanding debt or late payments or are using too much of your limit. Find out so that you know what to correct and avoid in the future.
If you see any errors you can dispute them with each of the credit bureaus on their websites. Errors hurt your score and may be a sign of identity theft. Remember, each bureau may have slightly different information, so it’s important to check all three credit reports for a complete picture.
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Frequently asked questions
1. How do I fix my poor score?
Start by checking your credit report for errors and disputing any you find. Make timely payments, pay down outstanding debts, and keep card balances low. Avoid new inquiries and consider using a secured credit card. Consistent, responsible financial behavior will improve your score in time.
2. How large of a loan can I get with a 550 credit score?
Personal loans for poor scores typically range from $1,000 to $5,000, depending on the lender. Secured loans, such as auto loans or home equity loans, tend to offer higher amounts.
3. Can I get a car with a 550 credit score?
You can buy a car, but 550 is not a good credit score. Subprime lenders or dealerships specializing in bad credit financing may offer options. Providing a larger down payment or securing a co-signer can improve your chances and potentially lead to better terms.
4. Can I rent an apartment with a 550 credit score?
Yes, you can rent an apartment, but it may be challenging. Landlords may require additional assurances like a higher security deposit, a co-signer, or proof of steady income. Providing strong references and demonstrating reliable financial habits can help secure a lease despite a lower credit score.
5. Can I get a mortgage with a 550 credit score?
Getting a mortgage will be tough. Expect higher interest rates and stricter terms. FHA loans are a viable option, as they cater to poor credit scores and require a 10% down payment. Improving your score before applying can increase your chances of approval and secure better loan conditions.
6. Can I finance a car with a 550 credit score?
Yes, there is no minimum credit score necessary to finance a car. However, you will likely have to pay higher interest rates and and a larger down payment. The exact financing options will also depend on the type of car.
Bottom line
It is possible to get a credit card or a personal loan with a credit score of 550, but it will be challenging. Invest time in shopping around for lenders who will work with you and ensure you get the most competitive interest rates possible.
If you can’t find a lender, then improve your score and reapply in a few months. A low credit score can be discouraging but is not a permanent state. The more you work to improve it, the more likely you’ll qualify for better offers.
Talk to a nonprofit credit counselor for guidance. Try a debt management plan if you’re having trouble reducing your debt. Take a look at MoneyFor for more personal finance tips and tricks. There are endless ways to move from a poor score to a good one.
This content is general in nature and is provided for informational purposes only. MoneyFor is not a financial advisor and does not offer financial planning services. This content may contain references to products and services offered through MoneyFor marketplace.