Are you looking to invest in your dream house and gather the required funds? Have you considered applying for a personal loan? You must be wondering that with the plethora of eligibility criteria, you may not be able to fulfill all of them, especially with a bad credit score. The good news is that there are options available for individuals like you to avail a personal loan with bad credit score.
The significance of a good credit score has been known by many, and people are gaining more knowledge about it day by day. To clarify all the queries, let us discuss the impact of good or bad credit scores while applying for a personal loan.
What are the Consequences of Having a Bad Credit Score?
A credit score is a 3 digit number that ranges from 300-900 and signifies how responsible have you been regarding the payment of your previous loans or debts. Lenders assess your creditworthiness considering your credit score. For example,
- >= 750 signifies a good score,
- 550-750 is considered to be an average score, and
- <550 is a poor or bad credit score.
When an individual defaults a loan amount or delays paying the monthly EMIs, their credit score drops. Having a low credit score tells the lenders that you are a risky borrower for them. In that case, the banks usually refuse to grant the loan amount or grant it at high-interest rates.
However, even if you have a low credit score and require funds urgently, you can get in touch with specific lenders who offer personal loans at high-interest rates.
How can you Improve your Credit Score Before Applying for a Personal Loan?
Even if you are applying for a secure or unsecured personal loan, it is important to maintain a decent credit score to close the deal at favorable terms. However, in order to NOT get rejected while applying for a personal loan, it is essential to become a responsible buyer when it comes to paying your credit card bills or EMIs. Here are a few tips to help you improve your credit score and receive a personal loan without any hassle:
- The first step is to pay off all the outstanding amounts like credit card balance or EMIs. If you have an ongoing loan, ensure to pay the monthly installments on time without any delays.
- Using a credit card can sometimes take a huge toll on your pocket, especially when individuals keep using their credit cards without clearing the previous bills.
- If you think that your spending patterns have been highly disturbed since the time you started using a credit card, you must not resort to canceling credit cards. Having multiple credit cards and delaying the payments of each of them can significantly reduce your credit score.
- Furthermore, if you think that you require at least one credit card for miscellaneous expenses, transfer the credit limit of multiple credit cards to a single one. However, this is only possible if all those credit cards belong to the same bank.
- Refrain from applying for a loan again and again and eventually getting rejected each time. Consecutive loan applications can make you seem desperate and hit your credit score again.
If your goal is to get the desired personal loan, maintain a decent credit score of 750 or above to get your loan application approved without any hassle.
Now that you have read through, you must have understood what is a personal mortgage and how can you improve your credit score for getting the loan effortlessly. You can also connect with a financial advisor for expert financial guidance.