475 Credit Score: Is it really that bad?

Although 475 is not a great credit score, it is still possible to get a mortgage, car loan, or unsecured credit card with this score. There are many lenders who are willing to work with people with poor or very poor credit scores. You may have to pay a higher interest rate than someone with a good credit score, but it is still possible to get the financing you need.

If your credit score is 475, don't despair! There are things you can do to improve your credit and build a strong financial future. Keep reading to learn more about how to get credit with a 475 score.

16,5% of consumers have FICO® Scores in the Very Poor range (300-579).

Although a 475 credit score is not ideal, it is still possible to qualify for a loan or unsecured credit card with this score. Lenders view borrowers with a 475 credit score as being high-risk, but there are still options available. Focus on rebuilding your credit reputation before trying to get a mortgage, car loan, etc. and you will be more likely to be approved for the financing you need.

How to improve your 475 credit score

Even though your FICO® Score of 475 is well below the average credit score of 711, there are still plenty of opportunities to improve it. A great way to get started is to obtain your FICO® Score and review the report that comes with it. This report will outline the main events in your credit history that are causing your score to be lower. Because the information is pulled directly from your credit history, it can help you identify specific issues to work on in order to raise your credit score.

95% of customers have FICO® Scores higher than 475

How to build a better credit score

If you have a FICO® Score in the very poor range, it's likely because of credit missteps in your past, like multiple missed or late payments, defaulted or foreclosed loans, and even bankruptcies. Your FICO® Score report can help you prioritize which credit missteps to address first. But it's also a good idea to get your credit reports from Experian and the other two national credit bureaus, Equifax and TransUnion. Familiarizing yourself with their contents can help you understand the missteps in your credit history, so you'll know what to avoid as you work to build up your credit. If you develop better credit habits, you should see improvements in your credit scores over time.

Of consumers with FICO® Scores of 475, 15.5% have credit histories that reflect having gone 30 or more days past due on a payment within the last 10 years. This shows that these consumers are reliable and trustworthy. They are the perfect candidates for credit products.

What makes an impact on your credit scores

If you have bankruptcies or other public records on your credit report, it's important to take care of them as soon as possible. Settling liens or judgments can reduce their impact, but in the case of bankruptcy, only time will lessen the harmful effects on your credit scores. A Chapter 7 bankruptcy will remain on your credit report for up to 10 years, and a Chapter 13 bankruptcy will stay there for 7 years. Even though your credit score may begin to recover years before a bankruptcy drops off your credit file, some lenders may refuse to work with you as long as there's a bankruptcy on your record. So it's in your best interest to take care of any public records on your credit report right away.

The average credit card debt for those with FICO® Scores of 475 is $7,656

Your credit utilization rate is one of the most important factors in determining your credit score. This is because it shows how much of your available credit you are using. To calculate your credit utilization rate, divide your outstanding balance by your credit limit and multiply by 100 to get a percentage. It's also a good idea to calculate your overall credit utilization rate, which is the sum of all your outstanding balances divided by the sum of all your credit limits. Most experts recommend keeping your utilization rate below 30% on each individual card and overall to avoid hurting your credit score. In fact, the utilization rate contributes as much as 30% to your FICO® Score.

Paying bills on time is the best way to improve your credit score. This accounts for more than a third of your FICO® Score, so it's important to be consistent.

If all other factors are equal, a longer credit history will generally result in a higher credit score than a shorter history. The number of years you've been using credit can influence up to 15% of your FICO® Score. If you're new to the credit market, there's not much you can do about this factor. But if you're patient and careful to avoid bad credit behaviors, you can gradually improve your score over time.

Your credit score is a reflection of your total outstanding debt and the types of credit you have. The FICO® credit scoring system favors users with several credit accounts and a mix of revolving credit and installment credit. If you have just one type of credit account, broadening your portfolio could help your credit score. Credit mix is responsible for up to 10% of your FICO® Score. By diversifying your credit portfolio, you can improve your credit score and access more financial opportunities.

If you want to keep your credit score high, avoid applying for too many loans or credit cards. Every time you apply for credit, it triggers a hard inquiry, which is recorded on your credit report and reflected in your credit score. A hard inquiry occurs when a lender reviews your credit score (and often your credit report) to decide whether to lend to you. Hard inquiries can cause your credit score to drop a few points, but if you keep up with your bills and don't apply for any additional loans, your score should rebound within a few months. New credit activity makes up for 10% of your FICO® Score.

Improving your credit score

If you have a very poor credit score, it's important to know that you can't convert it to a good or even fair one overnight. It takes time and patience to improve your credit score, but it is possible to see some steady improvements within a few months if you start developing habits that promote good credit scores. Here are some good starting points:

Pay on time

Paying on time, every time on accounts that report to the three main consumer credit bureaus is one of the most important things you can do to build a positive payment history and strong credit scores.

If you’ve made a late payment but caught it before it was reported to the credit bureaus, call your lender right away. They may be able to help you resolve the issue so it doesn’t get added to your reports. But if it’s already been reported, it can be tough to get the late payment removed from your credit reports.

Keep your balances low

If you want to improve your credit utilization rate (i.e. how much of your available credit you're using at any given time), it's best to keep your balances low on your credit cards.

Most people say that you should keep your balance below 30% of your limit. That's not a bad rule of thumb, and it's easy to remember. But if you can keep your utilization rate lower than 30%, that will help even more.

There's no benefit to carrying a balance on your cards if you can afford to pay off the full balance each billing cycle. So when it comes to credit-building strategies, it's best to make consistent charges to the account while keeping the total amount owed under 30% of your credit limit. If possible, pay off your statement balance in full and on time each month so you don't get charged interest on those purchases.

Debt-management plan

If you're struggling to make your loan and credit card payments, a debt-management plan may be able to help. You'd work with a non-profit credit-counseling agency to come up with a manageable repayment schedule. Once you enter into a DMP, all your credit card accounts would be closed. This can cause your credit scores to drop significantly, but they will start to rebound more quickly than if you declare bankruptcy. If this sounds too extreme for you, you could still consult a credit counselor (not a credit-repair outfit) to get some advice on how to improve your credit.

Credit-builder loan

Credit unions offer small loans designed to help members build or rebuild their credit. One of the more popular types of credit-builder loans works like this: the credit union issues you a loan and places the money in an interest-bearing savings account. Once you've paid off the loan, you get access to the money plus accumulated interest. The loan can lead to credit-score improvements as long as you make regular, on-time payments. Before obtaining a credit-builder loan, make sure the credit union reports payments to all three national credit bureaus.

Apply for a secured credit card

A secured credit card is a great way to improve your credit score. You only need to put down a deposit in the full amount of the credit limit, which is often just a few hundred dollars. As you use the card and make regular payments, the lender reports those activities to the national credit bureaus. This way, your good behavior is reflected in your credit files and reflected in your FICO® Scores. By making timely payments and avoiding "maxing out" the card, you can show lenders that you're a responsible borrower and improve your chances of getting approved for loans in the future.

Credit cards and loans with a 475 credit score

If you have a credit score of 475, it will be very difficult to borrow money, unless you are looking for a student loan. Only a very small percentage of loans and lines of credit have been opened by people with credit scores below 540 dating back to 2018. In particular, you're unlikely to qualify for a mortgage with a 475 credit score because FHA-backed home loans require a minimum score of 500. However, your odds are slightly higher with other types of loans.

Credit Cards For Poor Credit Score

Store credit cards

If you're looking to build your credit, store credit cards are a great option to consider. These cards typically offer incentives to shop at a particular retailer. Store credit cards can be either secured or unsecured, so they technically don't fit into a third category. However, they're worth mentioning as a potential option for building your credit.

If you have poor credit, you might have a better chance of getting approved for a store credit card. The potential downside is that these cards usually come with high interest rates, and you may only be able to use them at one specific store. However, they might also offer rewards and benefits that make sense if you already shop at that store. Therefore, it could be worth applying for a store credit card even if you have poor credit.

If you've looked into all of your options and still can't find a credit card that you can get approved for, don't worry--you have other options. One option is to ask a family member or trusted friend to add you to their credit card account as an authorized user. But before you do that, it's important to familiarize yourself with the pros and cons of being an authorized user on someone else's credit card.

Unsecured credit cards

If you can't afford a security deposit, an unsecured credit card might be a good option for you. The trade-off is that it might come with an annual fee — which is arguably worse than a security deposit because it's typically nonrefundable. You could also face higher interest rates. However, this option might be more manageable for you if you're tight on cash.

Secured credit cards

If you're working on improving your credit, a secured credit card might be the best option for you. With a secured card, you'll put down a security deposit upfront, which is usually the same amount as your credit limit. So if you have a $400security deposit, your credit limit will also be $400. This gives the issuer some insurance in case you close the account without paying off your debt.

Because they pose less of a risk, secured cards may be more available to people with poor credit. And if the lender reports your on-time payments and other credit activity to the three main credit bureaus, a secured card can actually help you improve your credit score.

Personal loans with a 475 credit score

If you have poor credit scores, you might find it difficult to get approved for a personal loan. This means that you might not be able to shop around for the best loan with the lowest interest rate. Instead, you may have to settle for a personal loan with a high-interest rate and other fees, such as an origination fee.

Even though a personal loan with a high-interest rate may not be appealing, it could still be a good option for consolidating high-interest credit card debt. The APR on your personal loan could be lower than the interest rate you’re currently paying on your credit cards.

Before taking out a personal loan, think about whether you really need the money right away. If you can wait a little while and work on building your credit, you may be able to qualify for a personal loan with a lower APR and better terms later on.

If you're in a tight spot and having trouble qualifying for a personal loan, you might be considering a payday loan. But these short-term loans often come with high fees and interest rates that can quickly get out of control. Before taking out one of these loans, think carefully about whether you'll be able to repay it.

Auto loan rates for poor credit

Even though there's no minimum credit score required to qualify for a car loan, it can be difficult to get approved for one if your credit is poor. And even if you do qualify for a loan, the interest rates are likely to be high, making it very expensive to borrow money. So if you have poor credit, it's best to avoid taking out a car loan.

If you have time to build up your credit before applying for a car loan, you may eventually be able to get better rates. But if you need a car right away and can't wait to build up your credit, there are some strategies that can help you get a loan.

Consider finding a co-signer who has good credit and is willing to share the responsibility of the loan with you. You could also look into alternative lenders, such as a credit union or online lender. Ask the dealership if they have a financing department that works with people who have poor credit. And finally, use buy-here, pay-here financing only as a last resort.