What is ‘Poor Credit score’
Poor credit score defines an individual’s credit history when indicates that the borrower has a high credit risk. A low credit score signals poor credit score, while a high credit score is an indicator of good credit. Creditors who give money to person with bad credit face a huge risk of that individual missing payments or defaulting than creditors who lends to individuals with the good credit.
How credit scores are determined
Fair Isaac Corporation (Fico) calculates credit scores. FICO uses three credit bureaus, Equifax, Experian & TransUnion, FICO Weigh various information in strategic ways to calculate the score. Fair Isaac Corporation (FICO) score ranges from 300 to 850. Borrowers with scores at or below 579 have poor credit score. Experian have said that 61% of borrower with score in this range are likely to default or seriously delinquent on their loan payment in futures.
Credit score between 580 & 669 is labeled as fair. Rest of these borrowers are likely to become seriously delinquent on loans, making them considerably less risky to lend to than borrowers with poor credit score. Even borrowers within this range face high-interest rates or have trouble securing loans.
Common Sign of a Poor Credit score Include:
- History of late payments for housings, utilities or monthly bills
- Problem is getting a lease for housing
- Cell Phone companies won’t give you a contact
- Checking account is overdrawn on a regular basis
- Paying higher interest than we see advertised
All of above mentioned have a negative effect on your credit score & making it more difficult to get a loan. If you have bad credit & need a loan there is option available in the market but it will take time & research to find the best one suited us.
Methods to get Loan with Poor Credit Score
- Visit the Credit Union – Credit Unions are same as commercial bank in terms of their services, but they are owned by their members rather than by profit-seeking shareholders. They are non-profit Institutions, means they use their earnings along to their members in the form of lower fees & borrowing costs & better customer service.
- Borrow from family or relatives– The loan taken from the friends Or relatives must be in a formalized with clear documentation & recorded. To avoid future Problems, create a written contract that includes the loan terms & interest rates which help us & lender in giving loan.
- Get a Co-Signer – If borrowing from relatives or friends is not working, you can still approach someone with good credit who trust your capacity to pay back the loan & you can ask him/her to be a co-signer on a personal loan from a traditional lender.With a creditworthiness co-signer, the lender will set the loan terms based on the credit score of the person with good credit, who is equally responsible for the repayment of loan.
- Peer to Peer Lending- It is also known as individual to individual lending, is relatively new loan form. Peer to peer lending is an online platform that allows you to borrow directly from the individual rather than from the institution but credit score is still a factor. As individual investor has much greater leeway in how it is to be weighed these loans are often more readily avail for the people with bad credit.
- Online personal loans – Technology has opened the door for the personal loan individual, a new industry that has created an option for people with low credit scores. These lenders work online & offer competitive loans for home repairs. Credit score plays a small role in the decision-making process so this could be an appealing option if you have poor credit score.
No credit or poor credit is a major hurdle when you go for loan application because you are viewed as a high-risk customer and apparently bank doesn’t want to deal with such customer by leaving the lender holding a bag of worms. That’s why maintaining a good credit score is as important as submitting all the required document while applying for any kind of loan.