Even though such a score has some positive implications, it is still regarded as a poor credit score by most lending institutions. This means you will struggle to secure new credit cards or loans as the companies will reject your application. Nevertheless, it may not be entirely impossible for a person to get a personal loan with such a low credit score if one searches for lenders and provides a reasonable application.
Having a credit score of 550 is the equivalent of having bad credit because such a score is so low and does not meet the requirements to be considered a good rating.
Credit scores have a standard range of 300-850. A score of 550 is below average, which means it is also below the range of good or excellent credit. To put it in concrete terms, a credit score of 550 is an indication to creditors that you have a tendency to make late payments or have missed them altogether, have high rates on revolving credit accounts, or collections accounts, or have records of public records such as bankruptcies or judgments. These facts show risk in prospect for the lending companies.
For instance, if you have a low 550 score, most conventional lending companies will reject your loan application on the spot. However, that does not mean that getting approval for the loans is out of the question at all. Some of the companies grant personal loans to applicants with poor credit scores so they to access the money they need.
Ways to Increase Your Likelihood of Getting Approved
Applying for a personal loan when one has a poor credit score is a tedious process. It involves the selection of the best approach, consideration of your initial financial status, and presentation of a good face to sell to the lenders. Tips to boost your chances of approval include: Tips to boost your chances of approval include:
- Look at the reports of the three major credit bureaus. Eliminate any errors that could be pulling down your scores.
- Reduce outstanding balances on credit cards and other credit instruments classified as revolving credit. Having low balances and credit utilization is also a good way of raising the scores.
- Do not open any new credit accounts or apply for other loans or credit cards before applying for the personal loan. Excessive hard inquiries create a negative image or signal, which is why the end of the year is recommended.
- Regarding the debt-to-income ratio, you should divide your total amount of debt by your monthly income. A lower DTI is an indication of less capacity to repay obligations or other credit obligations.
- Ensure that documents to prove that you are receiving income from your work or any other lawful means are well-compiled and genuine.
- Maintain records, so that one can be in a position to explain the past credit problems convincingly to the lenders.
Where to Go to Apply for a Personal Loan with $5,000 for 550 Credit
You still have choices even if most conventional banks only provide loans to candidates with outstanding to exceptional credit: You still have choices even if most conventional banks only provide loans to those with good to exceptional credit:
Online Loan Providers Operating on more permissive criteria based on the use of unconventional credit data, there are numerous notable online lender networks like Upstart, LendingPoint, and Avant. Their subprime loans go from $1000 to $35,000 or more. Based on the borrower's credit score, interest rates with these lenders usually range from 10% to 36% APR.
Peer-to-peer loan networks Some companies, like LendingClub and Prosper, enable personal investment by people into possible borrowers via web postings. You indicate the amount of cash you want to borrow and the accompanying explanations for loan requests. Which listing bids the investors will fund is entirely up to them. Poor credit score borrowers often get annual interest rates ranging from 15% to 25%.
Unions Credit Especially, if you belong to a local credit union, this will help you. Credit unions, being a legitimate lending source, might be ready to assist some of their members with terrible credit that other lenders would not be ready to support. This involves being ready to provide security or financial information to improve the outcome of the judgment.
To get a loan from close acquaintances, follow the steps below: Some of the borrowers may opt to seek personal loans from friends or relatives if any. Do not let these social lending agreements become a source of conflict and ensure that the terms of repayment are well understood. It is good to get needed funds from relatives but it comes with the danger of straining the relationship when no agreement was made beforehand.
Be Very Selective in Choosing Which Loans to Take Because personal loans can be beneficial in times of financial difficulties even with bad credit, avoid taking some loan offers that you know you cannot manage to repay without struggling. Approach all the terms carefully and borrow only what you can repay without strain, this will also help in preventing further deterioration of your credit status.
The Bottom Line Getting approved for a personal loan with a credit score of 550 may be challenging but is still possible. However, ensure that you do your homework researching the specialized lenders who are ready to deal with bad credit borrowers. A complete and truthful application should be presented to show the lender the capacity to repay the borrowed amount. If approved, it is important to ensure that one uses the loan wisely so that they do not compromise their financial or credit status any further. The additional effort can be quite beneficial to the borrowers, especially during the time of financial difficulties.
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