Yellowing on pepper seedlings.

I up potted these guys a few weeks back and they didn't look this horrible. I think my biggest concern is how yellow and curled the leaves are.

The potting mix was cheap Walmart BS with 0.05% nitrogen. It honestly felt more like mulch than soil, but it's what I had on hand at the time.

My pepino melon (potted at same time) doesn't seem to mind, so I'm also wondering if the peppers aren't liking the extra water.

Is it wrong to remove the soil and try to add a better quality soil now? Is it nitrogen deficiency?