550 Credit Score Personal Loan
When you only have a 550 FICO score, your chances of receiving credit or getting a loan become really low. That is because your credit score is considered low by many lenders, and they are thus unwilling to risk their money on you. Nevertheless, you can still get a loan despite your credit score, and you only need to know how to go about it.
How To Get a Personal Loan with 550 Credit Score
The first thing you have to keep in mind is that you still have many options and not to give up. Then you will need to enquire about credit options from different lenders until you find the best match. Since a 550 credit score is generally considered low, every lender is free to lend their money as they see fit. This means that there are a lot more factors considered other than FICO scores and you may have just the right combination of advantages. In the list below you will find our recommended lenders that should give you a head start.
When shopping around, you should also expand your alternatives to look at alternative and online lenders. Compared to conventional sources of funding, these sources will most likely be more lenient and considerate. Once you have identified the best lender for your needs, you can then reach out and begin negotiations.
Is there a way to increase the chances of approval?
One of the best ways to ensure you receive credit is by keeping your request low. Because your credit score is considered low, it’s best to keep your request low so that the lender sees the request as low-risk. Financing of below $10,000 is generally considered low-risk, and you should keep your request within this range. If you need financing above $10,000, you should consider asking for numerous loans from different lenders.
Also, remember that there are many ways to receive funding besides loans, such as credit cards. These alternatives may be approved more easily and raise your chances of approval. But you should be aware that with a 550 credit score, your spending limit will most likely be relatively low. It is also important to be selective about the credit cards you apply for because each provider will have different rates of repayment. In case you have any unused credit cards, it is advisable not to close them. Lenders see these as repayment options that give them more confidence you will be able to repay the loan awarded.
Another strategy is to request shorter-term loans. One may think that these carry higher interest, but in fact, you may end up paying less in interest compared to a long-term loan because of the short repayment period.
How much can you borrow with a 550 credit score?
It is almost impossible to tell how much a person may receive in funding at any credit score because every lender has different requirements. But as a rule of thumb, keep in mind that lenders often offer 200% of an individual’s pre-tax income. The amount offered will probably be lower at this credit score, but it’s a good place to start negotiating.
There are no guarantees that a particular lender will approve your request despite many marketers promoting ‘guaranteed approval loans’. What actually happens is that some lenders may be very flexible and not even take your credit score into account and consider only your income. However, that should not be taken as guaranteed approval.
See also Bad Credit Scores
How to improve your credit score
Although there may be ways of getting credit at a low credit score, the best thing to do is to raise your credit score to make the process easier next time and also enjoy better terms. It begins by checking your current credit score, and fortunately, the FTC allows for one free credit report per year. From this report, try to identify any errors there may be and immediately report them before working toward a better FICO score.
The most straightforward way is by paying off any outstanding debt. Start by paying off smaller debts such as those incurred on credit cards before taking on larger bank loans. If you have any credit cards, keep their utilization below 30%, or even better under 10%. You may also try applying for a consolidation loan that combines all your debts into one while at the same time raising your credit score from the repayments made.
Joseph Smith
Writer and editor
Joseph Smith is an experienced freelance writer with over 11 years of experience. His area of expertise includes finance, loans and lending. His work has been featured on various large websites including this one.
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