To build credit with a $500 credit card, pay the bill by the due date every month, as payment history is the most important factor in calculating your credit score. Keeping your credit utilization as low as possible will also help your credit score.
You can get personalized credit-improvement advice by signing up for a free WalletHub account. You can also check out general best practices below.
Tips for Building Credit with a $500 Credit Card Limit
Pay the bill on time every month. Late or missed payments can negatively impact your credit score, so it's important to always pay your bill by the due date. Try to pay in full, too, so you can avoid interest charges. Setting up automated monthly payments from a checking account is very helpful.
Keep your credit utilization low. Aim to keep your credit utilization ratio below 30%. This means that on a credit card with a $500 credit limit, you should try to keep your monthly statement balance below $150.
Use the card regularly. Consistently using your credit card for small purchases and paying off the balance in full each month will demonstrate that you can manage your credit line responsibly and avoid the temptation to overspend.
Monitor your credit. Regularly review your credit report for errors to ensure it accurately reflects your credit history. You can sign up for a free WalletHub account and get access to 24/7 credit monitoring, in addition to free credit scores and credit reports that are updated on a daily basis.
Request a credit limit increase. If your account has been open for several months and is in good standing, you may be eligible for a higher credit limit. Alternatively, if you have a secured credit card, the issuer may allow you to add funds to your security deposit, which in turn will raise your credit limit.
Apply for additional credit when your score improves. As you build a positive credit history, you may consider applying for additional credit cards or other credit accounts. However, avoid applying for multiple credit cards within a short period as it can negatively impact your credit score.
Remember, responsible credit practices over time can gradually improve your credit score and help you qualify for higher credit limits and better loan terms in the future. To learn more, refer to WalletHub’s guide on how to build credit.
This answer was first published on 08/29/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
You should use less than 30% of a $500 credit card limit each month in order to avoid damage to your credit score. Having a balance of $150 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.
How much of my $500 credit card should I use? ›
You should use less than 30% of a $500 credit card limit each month in order to avoid damage to your credit score. Having a balance of $150 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.
How long does it take to build credit from 500 to 700? ›
The time it takes to raise your credit score from 500 to 700 can vary widely depending on your individual financial situation. On average, it may take anywhere from 12 to 24 months of responsible credit management, including timely payments and reducing debt, to see a significant improvement in your credit score.
How much money do I need to spend on a credit card to build credit? ›
Traditional wisdom suggests credit scores benefit most when credit utilization remains below 30%. Those who can keep credit utilization below 10% may see even better results. In general, the lower the ratio, the better. The higher the ratio, the worse the negative impact on your credit score.
How to bring credit score up from 500? ›
6 easy tips to help raise your credit score
- Make your payments on time. ...
- Set up autopay or calendar reminders. ...
- Don't open too many accounts at once. ...
- Get credit for paying monthly utility and cell phone bills on time. ...
- Request a credit report and dispute any credit report errors. ...
- Pay attention to your credit utilization rate.
5 steps to build credit with a credit card
- Pay on time, every time (35% of your FICO score) Paying on time is the most important factor in building good credit. ...
- Keep your utilization low (30% of your FICO score) ...
- Limit new credit applications (15% of your FICO score) ...
- Use your card regularly. ...
- Increase your credit limit.
Keeping a zero balance is a sign that you're being responsible with the credit extended to you. As long as you keep utilization low and continue on-time payments with a zero balance, there's a good chance you'll see your credit score rise, as well.
When to pay a credit card bill to increase credit score? ›
Credit card companies report your balance to the credit bureaus every month, typically at the end of each billing cycle. If you make your payment shortly before your statement date, it could help reduce your credit utilization, which can help you increase your credit score or maintain good credit.
Why did my credit score go from 524 to 0? ›
Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.
How to increase credit score by 100 points in 30 days? ›
Steps you can take to raise your credit score quickly include:
- Lower your credit utilization rate.
- Ask for late payment forgiveness.
- Dispute inaccurate information on your credit reports.
- Add utility and phone payments to your credit report.
- Check and understand your credit score.
- The bottom line about building credit fast.
Keep your credit utilization low.
Aim to keep your credit utilization ratio below 30%. This means that on a credit card with a $500 credit limit, you should try to keep your monthly statement balance below $150.
Should I max out my credit card to build credit? ›
Experts recommend keeping your utilization below 30%, but if you want to build an excellent credit score, you want to keep that number in the 5% to 10% range. It's worth noting the average American's credit score is about 714, which counts as a "good" score.
Should I pay off my credit card in full or leave a small balance? ›
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
How fast can I build my credit from a 500 to a 700? ›
What Are Some of The Ways to Rebuild Your Credit Score? It's possible to go from a 500 credit score to 700 in 6-18 months, but your results depend on how you approach your credit. Making late payments and doing the same things as before will not help you build a good credit score and can prolong the process.
Which card is easiest to get approved for? ›
NerdWallet's Easiest Credit Cards to Get of May 2024
- OpenSky® Plus Secured Visa® Credit Card: Best for No credit check and no bank account required.
- Chime Secured Credit Builder Visa® Credit Card: Best for No credit check + flexibility and guardrails.
- Mission Lane Visa® Credit Card: Best for Unsecured card for bad credit.
Some of the easiest unsecured cards to get approved for are the Indigo® Mastercard®, Mission Lane Visa® Credit Card and Milestone® Mastercard®. While these cards are geared toward people with bad credit and have easy approval odds, they tend to charge high fees and interest, which can make building credit costly.
What is 30% of 500 credit? ›
Answer: 30% of 500 is 150.
What is the minimum credit limit of $500? ›
A minimum credit limit is the lowest amount of credit you can get approved for on a particular credit card. In Australia, minimum credit card limits typically start from $500 to $15,000 for personal credit cards and can be higher for business credit cards.
Is 500 a lot on a credit card? ›
A credit limit of $500 is also lower than the average credit card limit. Keep in mind that even if you start off with a $500 credit limit, that's not necessarily the limit you'll have forever. After six consecutive months of on-time payments, you might qualify for a credit limit increase.
Is 40% credit utilization bad? ›
Most credit experts advise keeping your credit utilization below 30 percent, especially if you want to maintain a good credit score. This means if you have $10,000 in available credit, your outstanding balances should not exceed $3,000.
