Most credit bureaus will label 555 as a poor credit score. Don’t worry, there are plenty of ways to improve it!
Unfortunately, consumers with a 555 credit score may have a hard time finding approval for loans and may struggle with other financial difficulties as well.
But, the good news is there is always room for improvement. Keep reading to learn about how having a 555 credit score can affect your finances, and how you can work towards improvement and ultimately earn a good credit score!
Key Takeaways for a 555 Credit Score
Overview of Your
Credit Rating
Generally, 555 is considered a poor credit score by the credit bureaus. Luckily, we have plenty of tips for how to boost your score and get back on track!
Borrowing Options With a 555 Credit Score
Due to the potential financial risk associated with bad credit borrowers, borrowing options may be limited for consumers with credit scores at or around 555.
Improving a 555
Credit/FICO Score
Consumers may be able to achieve a higher credit score by working on their payment history, limiting new credit inquiries, paying off debt, and reviewing their credit reports often.
Is a 555 Credit Score Good?
Looking at the average FICO credit scoring model, 555 is considered poor, or bad credit. But, if you have this type of credit score, know that you’re not the only one! According to Experian, 16% of consumers have a FICO score in the “poor” range. 555 falls within the lowest credit score tier, encompassing consumers with scores between 300 and 579. After that, there are consumers with scores between 580 and 699 who have fair credit. Next up are scores between 670 and 739 which is considered the “good” credit range, followed by the “very good” credit range (scores between 740 and 799). At the very top are excellent credit consumers who have scores between 800 and 850.
What Can You Get Approved for?
Self
4.6 Ninja Star Rating
- Build credit and savings
- No hard credit pull
- Automatic payments
- Reports to 3 main credit bureaus
Self is a lender that offers an easy and responsible way for borrowers to establish payment history and build credit, while building savings, through a credit builder account. It’s a small installment loan, but the money is yours (minus interest and fees), and even securitized by a CD.
Start Building Your Credit Today!
*Credit Builder Accounts & Certificates of Deposit made/held by Lead Bank, Sunrise Banks, N.A., First Century Bank, N.A., each Member FDIC. Subject to credit approval.
Katapult Lending
4.4 Trustpilot Rating
- lease purchase plans
- Simple process
- No hidden fees
- No credit required
Katapult offers lease purchase plans and paths to ownership for consumers who typically don’t have many financing options. If you’re considering a large purchase but you don’t have great credit, then Katapult may be able to help. They offer solutions with no credit required, and no late fees.
No Minimum Credit Score Required
Yendo
4.4 Google Rating
- Vehicle-secured credit card
- Up to $10,000 in revolving credit
- Quick & easy pre approval
- Build credit with responsible usage
Yendo is the first vehicle secured credit card. This means you can still get approved for their credit card, even with a less-than-perfect credit score. They use the value of your car to help determine your credit limit. They offer credit limits up to $10,000 with no hard credit inquiry.
Must Meet Their Approval Criteria
With so many loans and lenders out there, it can be hard to tell which ones could be a good fit or not. Some lenders have strict minimum credit score requirements and other lenders care more about income than FICO scores. Here’s a breakdown of a few common lending types, and how suitable they may be for consumers with poor credit scores.
Personal Loans
A personal loan is a type of installment loan that consumers can use for just about any expense. However, if you have a lower credit score, it will be important to research lenders and compare offers to make sure you find the best deal. This is because personal loan lenders usually reserve the best interest rates, terms, and loan amounts for borrowers with higher credit scores. But that doesn’t mean you can’t find a loan with bad credit, you’ll just have to look around.
There are also personal installment loans specifically designed for consumers with poor or even no credit. Funding like bad credit loans or a credit builder loan usually have easy approval requirements, allowing borrowers with just about any type of credit background to receive approval. These loans can even help consumers improve their credit history and credit scores over time when used responsibly.
Bank Loans
Bank loans are a type of loan distributed directly from a local or chain bank. Usually, bank loans are used for major life purchases, investing, home renovations, debt consolidation, or personal business ventures.
Unfortunately, borrowers with poor credit scores may not be able to get approved for a traditional bank loan. They may have a much easier time finding loans for 500 credit score from another direct lender who specializes in working with consumers who are struggling with their credit history.
Credit Union Loans
Instead of seeking out funding from the bank, bad credit consumers may have a better time finding approval for a loan from a credit union. Credit unions are nonprofit financial institutions that provide loans, checking accounts, savings accounts, and other financial services to their members.
Credit unions may be a great place to get a credit builder loan or personal loan if you have a less-than-perfect credit history. However, be aware that you will have to become a member before you are eligible for potential loans or lines of credit.
Credit Cards
As a loan alternative, you may also consider using a credit card to cover your expenses. With unsecured credit cards, borrowers have access to a predetermined credit limit every month. At the end of each month, the amount the borrower spent is added to their overall balance, and their credit limit renews. Credit card applicants with poor credit are more likely to get approved for a low credit limit, but they can work their way up as they improve their credit history and earn a higher credit score.
While a revolving line of credit can be extremely convenient because you can have access to extra funds every month without having to apply or reapply for a loan, it also puts consumers at risk of accumulating unaffordable credit card debt. So, if you choose to use an unsecured credit card, it’s important to make it a priority to pay off your balance as often as you can.
Secured Credit Card
There are also credit card issuers who provide secured credit cards, granting consumers access to credit without the risk of accumulating too much debt. With secured credit, consumers pre-pay their credit limit at the beginning of their billing cycle.
Some secured credit cards you may want to look into are:
- Bank of America® Customized Cash Rewards Secured Credit Card
- Chime Credit Builder Secured Visa® Credit Card
- Self-Credit Builder Account with Secured Visa® Credit Card
- Discover it® Secured Credit Card
- Capital One Platinum Secured Credit Card
Car Loans
An auto loan, also called a car loan, is a specific type of funding designed to assist consumers with purchasing a vehicle. Borrowers can access auto loans from banks, direct lenders, or even car dealerships. But, as with most loans, bad credit consumers may have a hard time finding approval for affordable terms and rates when it comes to auto loans. If you have poor credit and need an auto loan, you may want to consider asking a cosigner to sign your loan with you to help with approval, accessing better rates, or receiving a higher loan amount.
No Credit Check Loans
Bad credit borrowers going through an extreme financial emergency may also use no credit check loans like payday loans in order to get quick funding. Since payday loan lenders typically care more about the borrower’s income than their credit history, this type of funding is usually popular amongst consumers with poor credit. However, payday loans almost always come with extremely high-interest rates and very short repayment terms. And so, unless you can afford to repay your balance in full within about two weeks or less, this kind of funding may not be right for you.
Products to Help Improve a 555 Credit Score
Credit Monitoring Tools
One habit most consumers with a good credit score have is that they check their credit reports often. You can get a free credit report from each of the major credit bureaus each year, or you can check your unofficial report as often as you like via a soft credit check.
In addition to checking your credit report often, you may also want to sign up for credit monitoring services that will monitor your finances and alert you if anything suspicious happens. If your identity or credit card information is stolen, the thief can approve charges or open new accounts in your name that could end up harming your credit report and credit score. By catching this fraudulent activity ASAP, you can prevent unnecessary harm from bringing your credit down even further.
Budgeting Tools
Another helpful tool you can utilize on your journey toward a higher credit score is budgeting. While it’s definitely possible to keep a budget with an old-school pen and paper, you may also find it helpful to digitally keep a budget you can track on your computer or smartphone. Some popular budgeting apps you may consider are:
- YNAB (You Need a Budget)
- Honeydue
- PocketGuard
- Goodbudget
- Empower Personal Wealth
- EveryDollar
Credit Counseling
If you feel completely overwhelmed by the aspect of reviewing your credit history and navigating your finances, working with a credit repair company may be the perfect solution for you. Credit repair counselors and agencies can provide services like:
- Providing advice on how to manage your income and debts
- Assistance in developing a personal budget
- Analyzing your credit reports and credit scores
- Access to free education tools and resources
- Helping you develop a personal debt management plan
Benefits of a 555 Credit Score
Access to More Financial Products
The better your credit score, the easier it will be for you to get approval for whatever financial product you seek out. Generally, as your credit score goes up, your lending risk goes down, making you a more appealing borrower to all kinds of lenders.
Better Interest Rates, Loan Amounts, Etc.
In addition to receiving approval on a wider range of products, you may also have the opportunity to receive lower interest rates, higher loan amounts, and more convenient repayment terms by improving your credit scores.
Unexpected Perks
The advantages of improving your credit don’t stop with better deals on loans. You may also find yourself receiving other perks like an unexpected credit limit increase on your credit card or pre-approval on a line of credit if you don’t have one already!
How To Improve Your 555 Credit Score
Work On Establishing a Positive Payment History
Ultimately, the most important thing anyone can do to improve their credit score is to make consistent timely payments on all their bills. Unfortunately, late or missed payments can negatively affect your credit history for up to seven years! On the other hand, having a pristine payment history can help boost your credit significantly! Making up approximately 35% of your overall credit score, payment history is the most impactful factor on your credit report.
How Can I Make Sure I Don’t Have a Missed Payment?
According to FICO, more than 15% of Americans have had a missed payment of at least 30 days in the past year.2 If you have trouble remembering to pay your bills and loans on time, consider signing up for autopay. With autopay, your due payments will be taken directly out of your checking account, so you never have to remember to manually submit a payment!
Prioritize Debt
After payment history, the amount of debt owed is the next largest factor that makes up consumer credit scores; it makes up 30%. Therefore, being efficient about paying off your loans and other debts will be vital in going from a poor to an average credit score and beyond. To keep things organized, you can try the debt avalanche or debt snowball repayment methods. Or, you can incorporate habits like paying more than your minimum amount due each month to speed up the repayment process on some of your loans/balances.
Try Credit Boosting Programs
Over the years, credit bureaus and other financial institutions have curated programs specifically designed to help consumers achieve a higher credit score. Below are some of the most helpful ones.
Experian Boost
Experian Boost is a program that monitors and helps boost consumer credit. Essentially, this program allows consumers to benefit from making payments on things they are already committed to, such as:
- Utility bills
- Rent payments
- Cell phone bills
- Streaming services (like Netflix or Hulu)
Typically, credit reporting agencies don’t look at these types of payments when compiling data for credit reports, but with Experian Boost, they will!
TurboTenant Rent Reporting
Credit rating agencies traditionally track payments on mortgages, but not on rentals. That all changes with TurboTenant Rent Reporting. With this program, payments for rent will be tracked and calculated into your payment history on your credit report, so all you need to do is make your payments on time to see the benefit!
Grow Credit
Grow Credit is a program meant to help consumers with their credit utilization and payment history. With this program, consumers are granted a special kind of Mastercard with a very small credit limit (sometimes as low as $17). The point of this credit program is to have consumers connect their automatic payments to this Mastercard, allowing them to make timely payments as well as increase their credit utilization.
Avoid New Credit Account Inquiries
Avoiding new credit applications can also be helpful when trying to go from a bad to an average credit score. For example, instead of applying for a payday loan because you don’t have the average credit score needed for a personal loan, ask yourself if you have other options available. Some non-loan alternatives you may consider are:
- Dipping into your savings account
- Asking a trusted friend or family member for a small loan
- Organizing your budget to free up extra income
- Getting a temporary part-time job to earn extra cash
- Having a garage sale or selling unwanted items
These solutions may not only prevent you from accumulating more debt while being able to take care of your expenses, but they can also help you save money on interest rates, application fees, etc., as well as save yourself from a hard credit check bringing down your credit even further.
FAQs About 555 Credit Scores
Can improving my credit mix impact my 555 credit score?
Yes, adding different types of credit accounts can positively influence your score by showing responsible credit management.
How does credit utilization affect my ability to borrow money with a 555 credit score?
Keeping credit utilization below 30% is crucial, as high utilization can make it harder to borrow money.
What's the average credit score improvement rate for someone starting at 555?
Average credit score improvement rates will vary, but consistently responsible credit behavior can lead to noticeable changes within months.
What Interest Rate Can I Get With a 555 Credit Score?
Here are the average interest rates borrowers with a credit score of 555 are likely to receive on some of the most popular financial products:
Financial Product | Average Interest Rate |
Personal Loan | 25-36% |
Car Loan (New Car) | 13-20% |
Car Loan (Used Car) | 15-22% |
Credit Card | 22-30% |
Mortgage | 5-7% |
Disclaimer: These rates are indicative and can vary based on the lender, the specific circumstances of the borrower, and market conditions. It’s important to note that with a credit score of 555, which is considered poor, borrowers are likely to face higher interest rates across all types of financial products compared to those with a better or average credit score.
Can I Buy a House with a 555 Credit Score?
It may be exceedingly difficult to get approval for a mortgage when you have a low credit score. However, everybody deserves a place to live. And so, if you are trying to buy a house but are going through some credit challenges, you may try:
- Asking a co-signer to sign your mortgage with you
- Offer to make a larger down payment
- Working with the Federal Housing Administration to get an FHA loan
