What is a low score or a bad credit score? When does this happen?
If a person has a history of not paying his or her dues on time or owe too much money, he or she is considered to have bad credit and has a score low. Bad credit or low credit scores are typically under 580 on a scale of 300 to 850. A bad credit score or history simply means a harder time to get a loan or obtain a credit card.
However, a low credit score should not be a hindrance for getting a personal loan to provide funding for any emergency. Well, everybody deserves a second chance and that is also true when it comes to borrowing money. It’s a good thing that nowadays, there are a lot of financial institutions or lenders who help people to take out a loan with bad credit.
People with a bad credit score of 629 or even lower may need to exert more effort in order to qualify for a loan. The extra work needed to improve one’s credit standing will help in getting a loan approval and perhaps significant in lowering the interest rate.
#1 Check your credit standing. Your credit score will be a major factor in applying for a loan. It is proof of your creditworthiness, your ability to pay your debt on time and it is a testament to your being a responsible borrower. Lenders will have a credit score requirement and most likely people with bad credit will be rejected. It is best to personally check your credit online through reputable websites that offer this for free. You need to evaluate your credit behavior over the years and examine errors. Fixing these will help improve your credit status, giving you the opportunity to borrow larger amounts at lower interest rates.
#2 Shop around for different lenders and make a comparison. Different lenders have a unique processing system and varying interest rates and requirements. Look for a lender that offers a rate that you can easily afford and has the most convenient terms for you. Shop around and compare to find the best deals, which will also enable you to avoid high interest rates and other fees upon application.
#3 Consider pre-qualification. Pre-qualify on various lenders and banks that have this kind of feature. Pre-qualification is useful in providing you with the loan amount, rate of interest and repayment term so that you have an idea what to expect. This will also help you determine if you are qualified and would like to compare offers.
#4 Co-signed a personal loan. If you could have someone to co-sign your loan application, there is a high chance of getting approval. The other person’s financial details are valuable to show capability for repayment.
#5 Consider getting a secured loan. A secured loan will require you a collateral usually your car, property or bank account. If the borrower fails to repay a loan based on the agreement, the collateral can be seized from the borrower. Even if you have bad credit, banks or lenders will be willing to process your loan application on the merit of your collateral.