A 520 credit score on the FICO score scale of 300-850 is considered very poor. People with this credit score may have a difficult time getting approved for credit cards and loans. In some cases, credit applicants may be required to pay a fee or deposit.
Credit applicants may be required to pay a fee or deposit, and applicants with this rating may not be approved for credit at all.
How to Improve Your 520 Credit Score
You can get personal information about what is hurting your credit score the most. When you check your credit score from Experian, you’ll get a list of the individual factors that are impacting your score. To improve your credit score, work on these factors first.
Tips for Improving Your Credit Score
When you’re working to build your credit, it may help to think of credit reports and credit scores this way: A credit report is the “big picture” that shows your credit habits over time. A credit score is a number, usually between 300 and 850, that acts as a snapshot of your credit status at a specific point in time — the point when you’ve applied for credit and the creditor has requested a credit score for you. The snapshot is intended to help lenders predict how likely you are to repay your debt if they extend credit to you.
Credit Score Factors
Some of the key factors that affect your credit score include:
- Payment History: A history of paying on-time and as agreed will positively impact your credit score. Late or missed payments and delinquent accounts can harm your credit score.
- Credit Utilization Rate: Your credit utilization ratio (or balance-to-limit ratio) is calculated by adding the balances on your revolving credit accounts (such as credit cards) and dividing by your total credit limit. For example, if you owe $6,000 on your credit cards and have a total credit limit of $10,000, your credit utilization rate is 60%. It’s best to keep your credit utilization rate low – most experts recommend keeping it below 30%.
- Total Debt and Credit Mix: Credit scores consider the total amount of debt you have, along with the types of credit accounts you’re using.
- Credit History: Longer credit histories tend to positively affect credit scores. Short credit histories can make lenders less confident about your credit habits and the likelihood you’ll repay the debt on time.
- Recent Applications for Credit: Recent applications for credit, called hard inquiries, can have a short-term, negative impact on your credit score. (Checking your own credit is a soft inquiry and does not impact your credit score.)
- Public Information: Some public information, such as tax liens or bankruptcies, can appear on your credit report and negatively impact your credit score.
Steps to Build Credit
Working over time to build your credit can help improve your credit score. There are simple steps you can take, such as:
- Keep up with bills, including student loan payments, auto loans, credit card bills, and utilities. Set up automatic payments or payment reminders, so you pay on time every month.
- Work to pay down your debt, such as credit card balances.
- Be careful opening and closing accounts. Applying for new credit can cause a hard inquiry to appear on your account and harm your credit score. Closing credit cards can reduce your total available credit limit and harm your credit utilization rate. In some cases, closing a credit card account can also impact your length of credit history.
- Consider opening a secured credit card, using it for small purchases, and paying the balance in full on time every month.
- Get help from friends and family, by becoming an authorized user on someone else’s credit card or asking someone with good credit to co-sign on a loan. (Before you take these steps, make sure you’re prepared to use credit responsibly.)
What to Do if You Can’t Get Approved
If your credit score is too low, lenders may reject your application for a loan or credit card. Building your credit may improve your chances of getting approved when you reapply next. Some options for you may include:
- Becoming an authorized user on someone else’s credit card. The account should be in good standing, and the owner should have a good payment history on the card. Most credit scoring systems will incorporate authorized user accounts into their calculations, although they won’t have as much weight because the authorized user isn’t responsible for payment on the debt.
- Opening a joint account with someone who has good credit. You’ll both apply for the credit card, and the issuer will consider both your credit scores. If approved, you’ll both share full responsibility for payments on the account, and it will appear on both your credit reports.
- Getting a cosigner who has good credit. A cosigner is basically letting you borrow his or her good credit status in order to qualify for a loan. Cosigners share responsibility with the borrower for repaying the loan, and the debt will appear on both your credit reports.
- Opening a secured credit card. Most credit cards are unsecured — the borrower doesn’t put up any collateral to secure the loan. With a secured credit card, you deposit cash into a savings account held by the card issuer, and you receive a credit card with a limit that equals a percentage of the security amount. As long as the secured card issuer reports payment history to the credit bureaus, a secured credit card can help you build credit history.
Find Out More About Your Credit Score:
<>pIf you’d like to move up from 520 to a higher credit score, take the first step of understanding your credit by getting your free credit report from Experian. Then, learn more about steps you can take to improve your credit.