Learn what it takes to borrow with a less than perfect score

It is well known that a “good” credit score drives loan eligibility. Whether you need an urgent loan to finance a home improvement plan or to work on a great business idea, a credit score above 750 points would play a crucial role in making you eligible for it. On the contrary, having a moderate score of 600 to 700 points can put you in a difficult situation.

Having a score of less than 700 points makes you ineligible to borrow at the best interest rates. You would need a loan guarantee to borrow or you would need a credit improvement plan. Let’s explore each aspect of how to improve your score step by step below:

Understand how the credit check works

Every time you apply for a loan or credit card, the lender makes an inquiry about your past credit history and score to any of the major credit bureaus. Based on your previous credit rating, the lender would qualify you for the loan. The higher the score, the less risky your loan profile.

This credit check is a hard credit check and leaves a mark on your credit report. Multiple credit checks in a short period hurt your score. Therefore, you should make a loan inquiry only when you are sure of your approval. Being turned down for a loan can further damage your score.

A low credit score basically highlights insufficient borrowing capacity due to a high debt-to-income ratio, irregular payment history, high credit appetite, or more unsecured loans compared to secured loans.

work on your score

Before applying for a loan, it is important to evaluate your credit score. Assessing your credit health plays a vital role in making you eligible for credit. You must get your free credit report from the credit bureau. In this document, make sure all entries in your report are known. You should review it for errors. Many times, manual or technical errors can create a spike in your credit score. Since you would dispute an erroneous report, the score would be reactivated as the change is processed.

Next, you need to adopt some good financial habits. You must ensure payments of your credit bills and loan repayments on time. Not to mention, it’s important to use your credit card sparingly. As a general rule, you should not use more than 30 percent of your available credit limit.

Following a financial discipline wouldn’t help your score right away, but it would certainly show up in a few months. The best thing you can do with a bad credit history is to make it redundant by adding a new good history. Therefore, only consistent efforts will help you build a good score.

Contact Private Lending Partners

When you need urgent loans with a low score, you may want to consider using a collateral or guarantor to qualify for a loan. However, if you find the lender’s terms too rigid, you should consider contacting a licensed private loan counselor.

A loan officer or broker can help you find available loans. Generally, these loans are designed for borrowers with limited credit ratings. For this reason, they offer more flexible and tailored online loans. You will be able to compare and choose the most affordable loan according to your situation.

A word of caution: While a private loan broker can help you find a loan despite your bad credit history, it’s important to assess the affordability of the loan before you avail of one. You should never take out additional loans for occasional cash lapses. Because these loans are generally high-cost loans and attract hefty late fees. It is important to work on paying off the loan before increasing your debt load.