Credit Repair

 

Do you have a 524 credit score? Are you concerned about having poor credit? Are you ready to not only understand what went wrong with your credit... but to fix it? Perhaps you just need somewhere to start… and some resources to help you along the way.

How bad is a 524 credit score?

You were declined.

That preferred credit card with the awesome perks – 5% cash back? No annual fees? 9.5% APR? How could you not apply?

A few days later, you receive the bad news: Your application has been rejected.

But why? You take a look at your credit score report and there it is. It’s the reason that’s holding you back, the reason you didn’t notice until now.

You have a 524 credit score.

Okay, 524 – that’s not so bad, is it? Actually, it isn’t great – but don’t worry! There’s a lot you can do to improve it. And, with a bit of time, you can make sure you’ll never get declined for a loan again (or at least rarely).

In this article, we’ll go over the following:

• What a 524 credit score means

• Which factors into a 524 credit score

• Which types of loans or credit lines you can qualify for with a low score

• And what you can do to improve your credit score

3 credit bureaus (plus 2 types of credit scores)

Let’s start with a brief explanation of the three big credit bureaus, and why they matter.

The three big credit bureaus are Equifax, Experian, and TransUnion. Each one is essentially an agency that collects data relating to your credit and then reports it to financial institutions, credit card companies, other lenders and, in some cases, potential employers.

When you are looking for a loan – mortgage, personal, auto, line of credit, etc. -, the lender you go through will request a copy of your credit report from one of these bureaus. They will then take that information and use it to decide how risky (or safe) it is to lend you money.

Your score can make all the difference in how likely it is for you to qualify. The higher your credit score, the higher the chance you’ll qualify. The lower it is, the higher the chance of rejection… or of higher interest rates and less than ideal terms.

Understanding your credit score

To better understand your score, let’s refer to the chart below.

Image courtesy of MyFICO

FICO credit score ranges (and what they mean)

As you can see, a credit score ranges from 300 to 850.

At first, a 524 credit score might not seem so bad, since it’s right in the middle of that range. However, this is simply not true.

A 524 credit score falls into the “Very Poor” category (300–579). According to the credit bureau, Experian, an average score is actually in the mid-600s to low 700s.

Most lenders will not work with borrowers with a 524 score – but that doesn’t mean none of them will.

With a credit score in the 300-579 range, you will face more fees than someone with a higher score. These fees come in many forms, including:

• Higher interest rates

• Required cash deposit on credit cards (to serve as collateral in case you cannot pay what you owe)

• Additional collateral (in more extreme cases, this can be anything from a paid off vehicle to your home)

Depending on how low your credit score is, utility companies may require an additional security deposit on the equipment they lend you. They may also have extra fees in their service contracts.

Fact: Did you know that approximately 16% of American consumers have a credit score between 300 and 579? And that around 62% of consumers with a score in this range are likely to become delinquent on their payments – meaning they’ll be more than 90 days late? Source: Experian

On the other hand, someone with a “Fair” score (580-669) or “Good” score (670-739) has a much higher chance of being approved when they apply for a mortgage or other loan.

The good news is that boosting your poor credit score is completely doable. But it does take time and commitment.

The first thing you need to do is get your credit report. Once you have that, you can see where your financial history is at and what you can do to improve.

What is a FICO score vs a VantageScore?

Before we get to that (or you can skip ahead to the next section), did you know your credit score can vary, based on where you check?

In addition to the three credit bureaus, you may have heard of FICO and VantageScore. Both FICO and Vantage put together a credit score for big lenders to use when making their decision to lend money to you.

While there are small differences between the two, you don’t need to worry too much about them.

Who uses a FICO or VantageScore?

Banks aren’t the only ones who check your credit score through FICO or VantageScore. Others include:

–           Mortgage lenders

–           Credit unions

–           Auto lenders

–           Anyone else who might issue a credit card

–           Non-financial organizations (apartments to screen their prospective tenants, employers, certain dating sites, etc.)

6 factors that impact your credit score

Now that you know what your credit score is, it’s important to understand the factors behind it. And how much they impact it.

Credit utilization rate

It is always recommended to use no more than 30% of your available credit at any given time.

If you’re not sure how to calculate how much of your credit you’re using, try the following:

1)            Add up every available limit across any open loans or credit cards you have.

2)            Add up how much of your limit per account you’re using.

3)            Subtract the amount you currently own from your total limit.

To illustrate, let’s say Sally has four credit cards (A, B and C) and a personal loan.

• Credit Card A: current balance is $2,300/5,000

• Credit Card B: current balance is $375/$1,000

• Finally, Credit Card C: current balance is $0/$2,500

• Personal loan: current balance is $3,500/$6,000

• Sally’s total limit is $14,500, but her current total balance is $6,175. This leaves her with $8,325 in available credit.

From this calculation, you can see that Sally is using just over 57% of her available credit, which is much higher than is recommended.

Take a look at your balances and limits and ask yourself if you’re spending too much.

Did you know, the average person with a 524 credit score uses 89.9% of their available credit? The chance of low credit borrowers maxing out their credit cards is part of what makes many lenders wary of doing business with them.

Pro tip: Account for interest when adding up your monthly bills and, whenever possible, pay more than the minimums. This will help you manage and pay down your debt faster, which will boost your credit score.

 Payment history

Accounting for 35% of your entire FICO score is your payment history. The more on-time payments you make, the better it’ll be for your score.

That said, many people with a 524 credit score (or any score below 670) have a history of missed or late payments. There is no hard and fast rule for how much each late payment impacts your score. However, the longer you go without paying, the worse it is for your credit history.

Some lenders have a grace period of 1-3 days, meaning if you pay your bills within this window, they will not always report your payment as “late.” Try not to count on this leeway, however.

Keep in mind, too, that your more recent payments account for more of your credit score than your older ones. Say you were late by a week for a payment, 6 months ago, but you’ve been on time ever since with all of your bills. While the late payment will stay on your report for a long time, it carries less and less weight as time goes on.

Length of credit history

The next big factor in determining your credit score is the age of your open accounts. Rule of thumb: the older the account is (especially if it’s in good standing), the better it looks for you.

This factor has around a 15% impact on your credit score. So, if you don’t have any accounts open yet, it might not hurt to start with one.

Total mix of debt and credit

While it may seem contradictory, it can actually be beneficial to have several types of credit lines and accounts open at one time. That isn’t to say you should go out there and apply for a bunch of credit cards and loans all at once though.

Factoring into your credit score at up to 10% is the mix of credit and debt you have. This can include:

• Personal loans / installment loans

• Lines of credit (credit cards)

• Mortgage

• Auto loans

Having several accounts open at once – and making on-time, consistent payments – shows a potential lender that you can handle your finances. Not only that, but it can help you build up your credit score over time.

• Tip: If you have trouble managing several open accounts, make a solid budget or financial plan in place so you don’t end up in any financial trouble.

Recent credit activity / Hard inquiries

Next on the list is the recent activity or number of hard inquiries you have.

A hard inquiry is what happens when a potential lender requests your credit report. This can be anything from a car you’re looking to finance to a credit card you’re trying to qualify for.

Everything relating to your credit will show up in your credit score, one way or another. Because hard inquiries happen when a lender isn’t certain yet about working with you, these can look like a risk to other lenders who see your report later on. And, since lenders don’t automatically know the reasons behind these hard inquiries, they can have a negative impact on you qualifying for a loan (or card).

Did you know: Hard inquiries can stay on your credit report for up to a year; some stay even longer.

Your recent credit activity matters. Anything from you opening up several accounts at once to having multiple hard inquiries can look suspicious or risky to a potential lender. Knowing how many are on your report can help you rebuild your credit over time.

On the plus side, even if your score dips a little with more recent credit activity, it should rebound within a few months.

Bankruptcies & Collections

One of the worst things that can appear on your credit report – and easily bring you down to a 524 credit score or lower – is any negative marks. This includes:

• Filed bankruptcies

• Accounts in collections

• Foreclosures

• Debt settlements

These types of negative marks on your credit report are a huge red flag for future lenders. Certain lenders will not work with someone who has a bankruptcy on their record at all.

The good news is that you can often catch and rescue accounts before it gets to that point. And if you have a negative mark in your history, you can still bounce back. It just takes careful planning and, yes, some time.

Fact: Public record items like bankruptcies can stay on your record for 7+ years.

What doesn’t impact your credit score?

Now that you know what does impact your credit score, it can help to know what doesn’t.

Luckily, this part’s pretty straightforward. Things that do not count towards your credit score include:

• Your income (unless the debt-to-income ratio is heading towards the negative)

• Employment history

• Geographical location

• Marital status

• General demographics

While some of the above information (income and employment history) may be considered in your overall application, they are not considered in your credit score.

Why do I have a “Very Poor” credit score?

There you have it – all the factors that impact (and some common ones that don’t) your credit score.

If you’re still wondering why you have a “Very Poor” credit score, take a look at your credit report and see if you can find any areas that you can easily improve. You may find that there are some areas you wouldn’t have expected to impact your score at all – but that’s okay, too. Now that you know, you can take the steps you need.

If you take away one main thing from this, it should be the following:

• Having a 524 credit score isn’t great, but we’ve all been there. Given some time and careful financial planning, you’ll get it on the right track.

Which leads us into the next section…

How can I improve my 524 credit score?

If your credit score is in the 500 range or below, chances are you want to improve it. Although building or repairing credit takes time, you can take certain steps today to go from where you are now to a much higher score – with much more favorable odds of approval.

Pay your bills on time

Since this is one of the biggest factors that impacts your overall credit score, making sure you can pay back your debt on time is hugely important. Remember, payment history accounts for up to 35% of your entire credit score.

Credit can seem like such an intangible thing, especially when compared to cold, hard cash. We all have periods in our lives when making our payments on time can be a challenge – if not impossible.

And yet…

Because it’s such an important factor in what constitutes your credit score, on-time payments can give your credit a serious boost.

Maintain a low balance on your cards

As one of the three most important factors (up there with making payments on time and not having any derogatory marks – ex. bankruptcies or collections), keep your balances as low as you can.

In some cases, it may be helpful to pay them off entirely. Not only can this save you money in interest-bearing loans, but it lowers your overall credit utilization.

Of course, it’s okay to have to owe a balance at the end of every month. Some lenders appreciate this as well since it shows you are responsible enough to make your payments. Having a zero balance may be a red flag for some lenders as it can indicate you are inexperienced or unable to handle the debt.

Ultimately, there’s a fine line between paying off your entire balance… and maintaining a small ratio of how much of your available credit you’re using. If you aren’t sure, you can always ask the lender you’re interested in working with.

Keep an eye on your credit score

There are so many ways to get your credit report that it can seem a little overwhelming at first.

Instead of trying to check them all, choose one or two main places to get your report from and check it every 2 weeks or so.

Some options you have include:

• One of the three credit bureaus – Experian, TransUnion, or Equifax

• VantageScore or FICO

• A third-party source (Credit Karma, Credit Sesame, etc.)

Third-parties like Credit Karma are not 100% accurate, so it may be best to go with one of the bureaus. That said, you’ll get an overall idea of what you need to work on to improve your credit. The best part? It’s free.

You can also track your credit score through an existing credit card account. For instance, if you’re using Capital One, you can get a free credit report through them here.

Tip: Until April 2021, you can request a free copy of your credit report from each credit bureau every month. After that, you can still get a free report once a year.

Can I get a loan with a 524 credit score?

At this point, you probably want to know what you can get with a 524 credit score (or any score that’s considered high-risk to lenders).

With any of these options it’s going to be a challenge, but that doesn’t mean it’s impossible to get a loan. Far from it, in fact.

(Keep in mind that it might take some wrangling of your finances and some patience as you get your credit score in order).

Getting a mortgage loan with poor credit

You can get a mortgage loan with a credit score as low as 500, but your options are limited.

Types of mortgage loans you may qualify for:

1) FHA (Federal Housing Administration) loan

An FHA is the standard for borrowers with a low credit score. If you have a score between 500 and 579, you will be required to put a down payment of 10%. If your score is 580+, you only need a down payment of 3.5%. Keep in mind that the smaller your down payment is, the higher your overall loan costs will be.

FHA Lenders to check out:

Northstar Funding: They require a credit score of 580+ (updated December 2020).

Carrington Mortgage Services: 3.5% minimum down payment. Credit score requirement is 500+.

Angel Oak Mortgage: They have flexible rates with a minimum down payment of 3.5%, depending on credit score. The borrower’s debt-to-income ratio needs to be 43% or less, according to their main page.

2) Non-prime (or QM) loan

In brief, this is an alternative loan designed for borrowers with poor credit. These tend to have much higher rates than the standard 30-year, fixed-rate mortgage loans. You can qualify with a credit score that is 500 or above, but not always.

Bottom line

On top of your credit score and income reports, mortgage lenders often require proof of at least 3 types of credit, such as:

–              Loans

–              Credit cards / lines of credit

–              Auto loans

In special cases, they will accept proof in the form of utility bills or gym memberships. It helps when you also have proof of steady employment and your credit utilization is low.

Pro Tip: The higher the down payment you can put towards your mortgage, the lower the interest rates and the higher the approval rates.

Ultimately, it is possible to get a loan for property with a poor credit score, but your score needs to be closer to 620 to qualify for most conventional loans.

According to Equifax Consumer Credit Trends, only 1% of people get a mortgage loan with a 524 credit score. So the question you may want to ask yourself is:

–              How important is it that you get a mortgage right now? If you can wait until you boost your score even by 70 points, you’ll have much better odds and rates.

Getting an auto loan with poor credit

An auto loan is, generally speaking, much easier to get than a mortgage loan. Even if you have no credit, it’s possible to qualify – though, again, you’ll face higher interest rates and you may be required to put a higher down payment towards the loan.

Why is an auto loan easier to get?

Because they are considered a type of secure loan. In other words, the lender uses the vehicle itself as collateral. If you don’t pay, the lender can seize the vehicle, meaning their chance of loss is very low.

If you’re looking to get an auto loan, shop around to try to get the best interest rates possible. Typically, with a 524 credit score, you’ll find the APR to be between 11% and 16%. As an alternative, consider paying off a vehicle outright.

Keep in mind, if you get a 5-year auto loan that has 16% APR on a $15,000 vehicle, you’ll be paying nearly $22,000 at the end.

Check out how to calculate your auto loan’s interest here.

Getting a personal loan with poor credit

As with any other loan, getting a personal loan with a low credit score will result in higher APRs and, ultimately, higher costs. Lenders typically prefer higher credit scores because, on average, more people with lower scores tend to default on their loans. This often results in poor terms for you.

Further reading: Getting a Personal Loan with No Income Verification: The Ultimate Guide​​

As an alternative, consider getting a cosigner or a secured loan. Secured loans do require collateral in the form of a cash deposit, paid-off vehicle, or property.

You can also try for a payday loan or a cash advance from your credit card, but these tend to have extremely high interest rates. If you don’t need the cash and just want to repair your credit, consider taking out a personal loan instead.

The same goes for short-term personal installment loans. If you are in a pinch, or if you are looking to build up credit, you always have options. Just make sure any lender you use reports to the credit bureaus or your payments may not count towards improving your score.

Consider getting a credit-builder loan instead, since these help you build up credit in a more secure way. Check out this post on credit builder loans – it covers everything you need to know.

Getting a credit card with poor credit

Perhaps one of the best ways to truly start building up (or repairing) your credit is to get a credit card of some sort. The awesome thing with this is that you don’t necessarily have to even use it, though it can help if you do. Just be sure to make the payments on time!

In general, you have three main options when it comes to getting a credit card with a low (or even nonexistent) credit score:

• Store credit card

• Unsecured credit card

• Secured credit card

You may have already heard this, but the best option for someone with a 524 credit score is a secured credit card. But that doesn’t mean you can’t still qualify for one of the other two options.

Secured credit cards, however, are easier to get than unsecured ones and can sometimes convert into an unsecured card (with a higher limit) with good payment habits. If you’re looking to improve your credit score, starting off with a secured credit card can also help you to do that – with lower interest rates than most of the other options.

Remember: You can always get a secured credit card and then freeze or hide it someplace to reduce temptation to use it. If you’re looking to build up your credit only, then having an open account helps.

What makes a secured credit card different from an unsecured one?

In brief, a secured card requires you to pay a deposit to serve as collateral in case you don’t pay. The deposit is refundable upon successful repayment. Unsecured cards have higher limits but can require a higher credit score.

With an unsecured credit card, watch out for hidden fees – late payments, cash advance fees, annual fees, transfer fees, etc.

Another good option is a store credit card (or closed-loop card). These also do not typically require a credit score, and they can have perks like cash back or specials in-store coupons. However, store credit cards can have very high interest rates and possibly other fees.

Best secured credit cards for 524 credit score

Luckily, even with a 524 credit score, you can still get a starter credit card to build or repair your credit. Once you’ve gotten out of the 500s range and into the 600s and up, you’ll start seeing a lot more options.

Let’s take a look at some of the best credit cards for a low credit score.

Secured credit cards:

Discover It – Their annual fee is $0 and their APR is competitive at 0% for 14 months, followed by 11.99% to 22.99% after that. The deposit is between $200 and $2,500.

OpenSky Visa – With an annual fee of $35 and an APR of 18.14%, this secured card requires a deposit of $200.

Secured Mastercard® from Capital One – The annual fee is $0, but they have a variable APR of 26.99% The initial deposit is as low as $49.

Platinum Mastercard® from Capital One – There is a $0 annual fee with this card. The APR is 26.99% (variable). The deposit varies as well.

Fingerhut Credit Card – With a $0 annual fee and low credit score, this is a great choice for building up your credit. The APR is 29.99%, but you will not be charged if you pay in full every month. If your application is not approved, they will automatically consider you for the Fingerhut FreshStart Installment Loan instead, which requires a down payment of $30 with a $50 purchase.

*More comprehensive list to come

What about getting a loan with a 524 credit score?

Although the options for a loan are limited and the total cost can be rather high after interest, you can still get a loan with a low credit score.

Your options include:

• Installment loans like mortgages (FHA)

• Credit builder loans

• Secured personal loans

• Short-term personal installment loans

BadCreditLoans, for instance, offers loans from $500 to $5,000 to people with bad or no credit. It is a free, online service, but go over the loan terms carefully before agreeing to anything.

You can also check with your financial institution to see what they offer or advise.

What if I have no credit? How long until I get a 524 credit score?

Establishing or repairing credit can take anywhere from 6 months to upwards of several years. Starting now will get you on the path to good credit – and better opportunities.

Make a plan to improve your 524 credit rating

It’s all too easy to brush problems aside and hope they resolve themselves. Unfortunately, this doesn’t work well when it comes to building up credit.

Once you have a copy of your credit report – either from Experian or another source –, you can see where you need to make improvements.

It may be that you have trouble paying your bills on time (possible solution: automatic payments & budgeting).

Or perhaps you’ve had a rough history of defaulted loans or foreclosures (solution: repay what you owe, if possible, and start fresh now).

Whatever the cause of your poor credit score, evaluate your credit history, and start to make an actionable plan to fix it. Even just raising your score from 524 to 580 (Fair) can give you much better options.

It may take a few months (or longer), but a solid plan will go a long way to building your credit, if you stick to it.

Tip: Get a friend or partner to help you stick to your credit-building plan. Of find a credit repair company to assist you.

8 tips on getting a better credit score

Many people who have poor credit are struck with feelings of unease or uncertainty. This can make improving their circumstances more challenging than it needs to be.

If this sounds like you, just remember this: you don’t have to do it alone.

Here are some tips on getting a much better credit score.

Find the best rates on loans and credit cards

It’s been said before, but it bears repeating: The lower your credit score, the less ideal terms you’re likely to get when it comes to loans or lines of credit.

But there are always options. Don’t settle for the first one you find – look around and compare rates.

Establish a budget

Make a personal budget to help you cut unnecessary expenses and manage your personal finances better.

Further reading: How to Make and Stick With a Personal Budget.

Look at all the different things you’re spending money on and decide what constitutes as a “want” vs. a “need.” Chances are, some of that money you’re spending could be better used elsewhere – like building up your credit or keeping your balances low.

Consolidate your debt

Sometimes getting a better handle on your finances (and thus improving your credit score) is as simple as consolidating your existing debt into one, low-interest loan.

Establish open communication with your creditors

Those people you owe money to? They may seem intimidating, but they really don’t have to be. Just like you, they’re looking to make a profit. If you’re not paying them, they’re not making money.

The good news is that creditors often respond well to communication and clear negotiation. This doesn’t mean your debt will disappear or anything. But sometimes you can renegotiate an existing loan for a lower minimum monthly balance, waive existing fees, reduce your monthly interest, or transfer your current balance to a more affordable account.

Talk with the people lending you money and try to get a more affordable deal. Doing this can help you make sure your payments are on time and that your credit score continues to rise.

Dispute inaccuracies and negative marks

Sometimes, you’ll find an inaccuracy on your credit report that’s harming your overall score. When this happens, you can speak to your lender about it. If you need to dispute an item directly, you can write a dispute letter to the bureau to try to get it removed.

Monitor your rates – they can increase!

A lot of credit cards have something called “variable” APR. This means your interest rate can actually increase (or decrease) with external circumstances. Higher interest rates can mean higher minimums, which can be harder to pay back on time.

Keep an eye on your open accounts. Don’t skip over the fine print.

Close unnecessary accounts

The sheer amount of open accounts you have can be overwhelming. If this is something you’ve struggled with, consider closing some of your less useful accounts. Don’t be alarmed if your credit score dips down temporarily when you do – it will go back up. This happens when you have a higher balance-to-limit ratio on your open accounts.

As long as it helps you manage your debt, your 524 credit score will thank you.

Keep 3-5 open accounts that are in good standing

Contradictorily, it is recommended to have at least 3 open accounts, especially if they are diverse in nature. This doesn’t mean you have to use all of them. Try to shoot for 5 accounts – personal loan, line of credit, etc.

Remember: having a diverse portfolio can impact your credit score by as much as 10%.

You have options, even with poor credit

Getting approved for a mortgage, unsecured credit card, or personal loan can be incredibly difficult when you have a 524 credit score. Still, things do get easier as you build up your credit.

Even just a 76-point increase to 600 can level the playing field immensely.

With better credit, you’ll get better terms and APR, increased approval odds, and the peace of mind knowing your finances are on the right track.

If you can wait to get a loan until you’ve raised your score a little, you’ll save money in the long run on interest and other fees that come with a lower credit score.

Where do I go from here?

Anyone from your future landlord to your financial institution may need to look at your credit at some point. But you are in control of what they see. Knowing what to expect, and understanding your score, helps you to keep one step ahead.

Now that you understand what a 524 credit score means and what factors go into your score, you can start making plans to repair or build your credit. If you need additional help, you can also consult with a financial expert or credit repair service.

Ultimately, whether you have a 524 credit score or a 750 credit score, it never hurts to keep an eye on your credit as it grows and changes with time. Doing this will also help you and your family make the best financial decisions related to your credit.