When sanctioning loans, banks or financial institutes typically check your creditworthiness, which means the ability to repay your loan. If you have a credit score of 750 or above, you can easily get a loan, but what if you are stuck with a bad credit score? If you have a bad credit score, you can still score bad credit score loans easily. This article has covered details regarding a bad credit score, the reason for getting a bad credit score, how to get low credit score personal loans and how to improve your credit score. Stick till the end to grab all the required information at one go!
What Does Bad Credit Mean?
Putting the term in simple words, we can define credit score as the ability of a borrower to repay the amount he has borrowed or the loan sanctioned to them. The credit score is calculated with numbers that lie between 300-900. Several factors are considered while calculating the credit score, including the previous loan taken, repayment history, etc.
A person with a good credit score is most likely to get a reasonable sum of the loan than a person with a poor credit score. However, if you are someone with a low credit score, this article is just for you. W have curated the best way to get a low credit score personal loan. However, before having a look at the tips, let’s understand the reason behind bad credit scores.
Reasons For Low Credit Score
Although one can borrow money with poor credit scores, it’s evident that lenders are reluctant while lend them the money. T e simple reason behind the same is that there will always be a higher risk associated with lending money to those with low scores. T e following is the reason for bad credit scores.
● You failed to make a payment.
● Your credit card balance is unusually high.
● Your credit report contains an error.
● You signed a loan or credit card application as a co-signer.
● You made many credit applications.
● You canceled an old credit card.
● Your unpaid account was sent over to collection.
● Your most recent collection has been removed from your credit report.
● You canceled or closed a credit card.
How To Get Loan With Low Credit Score:
Here are a few tips for getting bad credit score loans.
- contact your current bank:
The first thing is to go to a bank and get all the required information, including the loans you are eligible for, the interest rate of those loans, etc. You can do this by contacting your current bank or going to a different bank. Before submitting your application, do consider different banks.
- Evidence of secure income:
You will be considered and granted a loan if you have proof of an income source that is secure and permanent. With this, lenders will have an assurance of payment of the amount they have lent. If you have multiple income sources but a stable amount, you can share different sources as proof. But with a low credit score, the interest rate might be high.
- Appeal for a lower loan amount:
If you are with low credit score, applying for a loan with a lower loan amount will be preferred. Even if there is a risk of no repayment, the lender will consider your application as the amount will be low, and they won’t lose a lot of money. Whereas if your application has a high amount mentioned, there are high chances of getting rejected.
- Rectify errors in CIBIL score:
There might be an error in the CIBIL report that is generated. The primary reason for the same is an un-updated report. These can indeed hamper your credit score and hence decrease the chances of a loan. So, make sure you keep things updated now and then.
- Take the help of Credit Unions:
Now, this might seem completely new, but that’s possible. To take a loan, you can take the help of small organizations like credit unions; They just require simple membership that will check your current location, employment, and a few other factors.
Availing of their services is a viable alternative to predatory title or payday loan lenders. Credit Unions will most likely come to your aid to help you find a product that suits your needs.
- Alternative payday loans:
You might have heard of alternate payday loans. These loans are offered in smaller amounts and have a tenure period of 1-6 months. This can be your go-to option if you have a well-structured plan to repay the amount.
How To Improve Credit Score?
If you are tired of your low credit score and finding ways to increase your current score, here are some tips for you:
- Payoff your balance on time, If you pay your bills or installments on time, this will gradually increase your credit score.
- Make a good plan strategy to use your credit cards; with proper strategy, you can use your credit cards to make money.
- Avoid canceling a credit card at any cost. If you cancel your credit card, the overall score will decrease, which is a bad credit score.
- Finally, the most important tip is to stop applying if your application gets rejected multiple times. A gap of 2-3 months will be better for the following application to get in. The consistent application will prove that you are in extreme need of credit which can decrease your credit score.
So, that’s all you need to know about low credit score personal loans. F r any further queries, let us know in the comment section, and we will get back to you as soon as possible.