525 Credit Score
Is 525 a good credit score? 525 credit score loan & credit card options. How to improve a 525 score.
A 525 credit score is classified as "bad" on the standard 300-to-850 scale. It is 175 points away from being a “good” credit score, which many people use as a benchmark, and 115 points from being “fair.” A 525 credit score won’t knock any lenders’ socks off, but it shouldn’t completely prevent you from being approved for a credit card or loan, either. For example, roughly 1 in 10 new credit card accounts are opened by someone with a credit score below 580, according to Equifax data.
Key Things to Know About a 525 Credit Score
- Credit Rating: Bad
- Loan Options: Limited
- Loan Cost: High
- Best Option: Secured credit card
Below, you can learn more about what a 525 credit score can get you and, even more importantly, how you can get a higher credit score. To that end, you can also check out your personalized credit analysis to see where you need to improve and exactly how to do it.
Credit Cards with a 525 Credit Score
The best type of credit card for a 525 credit score is a secured credit card. Secured cards give people with bad credit high approval odds and have low fees because cardholders are required to place a refundable security deposit. The amount you put down usually becomes your credit limit.
Popular Credit Cards for a 525 Credit Score
Even if you don’t use it to make purchases, a credit card can help improve your score by adding positive info to credit report on a monthly basis. A secured card won’t give you an emergency loan, though. For that, you’ll need an unsecured credit card for bad credit. Such cards aren’t ideal, as they charge high rates and fees while allowing you to borrow very little. But they might be your only option.
Car Loans with a 525 Credit Score
People with credit scores below 540 receive less than 7% of all auto loans. With that in mind, compare your auto loan options carefully and consider placing a bigger down payment or purchasing a vehicle that’s less expensive to avoid a loan altogether.
Mortgages with a 525 Credit Score
Less than 1% of first mortgages go to borrowers with a 525 credit score, partly because FHA-backed loans require a credit score of 500 at a minimum. Working to improve your credit score before you apply will make it much easier to get approved and will save you a lot of money. For example, a credit score of 580 or higher qualifies you for a lower down payment (3.5% vs. 10%) on an FHA home loan.
Student Loans with a 525 Credit Score
Student loans are some of the easiest loans to get with a 525 credit score, seeing as nearly 25% of them are given to applicants with a credit score below 540. A new degree may also make it easier to repay the loan if it leads to more income.
Note: Borrower percentages above reflect Q3 2017 Equifax data.
525 Credit Score: Reasons & Remedies
Familiarizing yourself with some of a 525 credit score’s common causes and the corresponding solutions can help you improve your credit score faster and avoid repeating past mistakes.
Reason 1: Delinquency & Default
The impact of a serious delinquency is obvious from the manner in which credit scores rebound when it’s gone. Roughly 11% of people who fall 90 days behind on a loan or line of credit see their credit scores rise by at least 50 points when that record comes off their credit reports, according to FICO research. And nearly half see an increase of up to 29 points.
Remedy: If you have not yet defaulted on a delinquent account, making up the payments you’ve missed is your best option. Having your account default will cause your credit score to fall further, possibly leading to collections and even a lawsuit, both of which could add to the credit damage. Each missed payment you make up will reduce your delinquency level, so you don’t have to pay the total amount due all at once. You can also explore debt management and debt settlement.
If you have defaulted, your next steps in terms of any amounts owed will depend on whether your account is taken to collections and what your state’s statute of limitations is. As far as your credit goes, a steady dose of on-time credit card payments is the best recipe.
Reason 2: Repossession / Foreclosure
Having a home foreclosed or other property repossessed to cover unpaid balances on underlying loans can take your credit score from excellent to bad. For example, someone with a credit score of 780 could expect to see his or her score fall to 620-640, according to FICO. And an individual with a 720 credit score would likely see that score fall to 570-590.
Remedy: Repossession and foreclosure are unlikely to be the lone negative marks on your credit report, considering they come after numerous missed payments and may be accompanied by collections accounts. And all of that negative information won’t fall off your credit report for seven years. So there’s no quick fix.
Rather, you need to slowly rebuild your credit reputation by establishing a pattern of on-time payments on any loans or lines of credit you have open. You should at least have one credit card account, for the chance to add positive information to your credit reports every month.
Reason 3: Bankruptcy
Bankruptcy is the worst thing that can happen to your credit score, reducing even scores in the high 700s to the mid-500s, according to FICO. And it generally takes scores 7-10 years to fully recover. Unfortunately, there’s no way to lessen the impact. But you can speed up the process by placing a deposit on a secured credit card and locking it in a drawer, or making purchases and paying the bill on time every month.
Remedy: You’ll need to clear this with the court if you’re currently in bankruptcy proceedings, but when the time is right, simply opening a secured credit card will let the healing process begin. Secured cards offer the highest approval odds of any credit card because you have to place a refundable security deposit, the amount of which becomes your spending limit. And they report account information to the major credit bureaus on a monthly basis, just like any other credit card.
So each month your card’s issuer reports your account as being in good standing, a bit of positive information will be added to your credit reports to help cover up previous mistakes. There are two ways to ensure the information will be positive: pay the bill on time every month and don’t use the card at all. If there are no purchases to pay for, you’ll automatically receive credit for paying on time.
Top 10 Resources for a 525 Credit Score
- Bad Credit Guide
- Why Did My Credit Score Drop? Top 10 Causes
- Free Credit Score Simulator
- What’s Included in Your Credit Report & When Does It Get Updated?
- How to Rebuild Credit in 7 Steps & How Long It Will Take
- Why On-Time Bill Payments Are Important & How To Never Miss A Due Date
- How To Improve Your Credit Utilization
- How To Pay Off Credit Card Debt: The Best Way & Tips
- Most Common Credit Card Mistakes & Tips to Avoid Them
- What Is a Secured Credit Card? Definition & Examples
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