How To Get a Loan With a Bad Credit Score
Loan choices appear to be more limited when you have a bad credit score. But remember, there are many different types of loans and loan providers available which could suit your individual situation.
For anyone seeking a loan, it’s important to understand its terms so you can choose the best option for you. Read on to find out ways in which you can improve your credit score.
What is Considered a Bad Credit Score?
When applying for a short term loan, lenders use your credit score to predict your risk as a borrower. Although very similar, each lender has a different scale to determine what is considered a good or bad credit score. Some score ranges may be as follows:
- Exceptional: 800 to 85
- Very Good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
Borrowers with higher scores are not only more likely to get approved for a loan, but they also tend to get better terms.
How to Improve Your Chances of Getting a Loan
If you need to borrow money but you’ve got a poor credit score, the goal is to find a loan that you qualify for at as low a cost as possible. Building credit takes time, but depending on why your report is low, a few actions can raise your score relatively quickly.
- Check your credit report for errors. No one will check your credit report for accuracy on your behalf. You have the right to dispute and request removal or correction of any data that you believe is incorrect.
- Leave old accounts open. Part of your credit score is based on the average age of all your accounts and the age of your oldest account. Unless there’s a reason, such as an annual fee you want to avoid, don’t close your oldest accounts
- Pay on time, every time. Your payment history influences your score more heavily than any other factor. Strive for perfection. Recent history is more important than older entries, so there’s no better time than the present to start improving your credit. Late payments stay on your credit report for up to seven years, but the older they are, the less impact they have.
What to Do if You’re Application is Rejected
If your loan application is denied, take a step back to reassess your needs and options. Remember, your score may go down a little after each application, so do not rush into multiple applications to see what you can get.
For more information regarding your application not being approved, take a look at our guide here.