Banks are seen to make use of credit score to ensure if you use credit responsibly. A person with bad credit score will have less chance of getting a loan approval. It might be difficult but never impossible to get loan approvals with bad credit.
How Can A Credit Score Affect Your Loan Approval Process?
Each and every data present in your credit report is checked for a high standard statistical analysis for calculating a credit score. It is a 3 digit number that ranges between 300 to 900 and gives your loan provider an instant idea of how credit worthy you are. Higher the credit score, the better will an individual’s credit report. Thus he will be having a higher chance of getting a loan approval. A credit score will let prospective money lenders or loan providers decide quickly if you will be a high or low risk consumer.
Suppose for example, if you have a credit score of 750 or above, it will signify that you have shown good credit conduct across every loan consistently over a considerable amount of time. Any borrower with a good credit score will have a very high opportunity of getting his loan approved. A score that is somewhere between 600 to 750 is average. You may get your loan approved by some lenders but rejection chances are higher. If your credit score is more than 300 or less than 599, there is no way that you will get an approval for any unsecured loan such as a personal loan. There is a very little possibility of you even passing the initial approval stage for a home or auto loan.
What Is Credit History? Is It Vital For Different Types Of Loans?
If you have a bad credit, then the type of loan that you are applying for will play a key role in deciding whether your loan will get approved. For a home loan that is usually for a large loan amount with a long loan term, a credit score will be important because lender will require assurance of your repayment ability over a long duration. Few loan providers may also agree on extending home loans even if you have a bad credit. But the loan terms will be unfavourable such as higher rate of interest, lower loan to value, short loan term and requirement of a guarantor. Likely, the rate of interest on a personal loan will be very high for an individual with low credit and a guarantor will be a must. Credit card providers will never give you a credit card if your credit score is low, except it is any add on credit card that depends on the credit score of someone else. If you apply for a gold loan with a bad credit score, you will get it approved as you will be keeping your gold as a security against any type of default.
Will There Be Any Problem If You Apply For Loans With Bad Credit?
There is no restriction on applying for any loan if you have a bad credit score or history. But you should remember that you will be making your credit report worse with each of your loan application. If your loan application gets rejected by many lenders due to poor credit history, each of these rejections will be lowering your credit score further and thus damaging your credit report. Even if your loan applications gets approved, lender will worry about your bad credit report and will levy strict terms as well as conditions for protecting their money. There will be a high probability that you will need to pay high rate of interest, have small period for loan repayment and even receive a smaller amount for your applied loan.
What Should You Do At First To Get A Bad Credit Loan?
Different lenders have different need as well as criteria to lend a loan. Thus there is a chance that if several lenders reject your loan application, you may have some little chance for qualifying with another loan provider. Most lenders require a minimum credit score of 750 before they accept your application. If you have a credit score that is less than 750, it will be difficult for you to clear the first stage of the loan approval procedure. You will be considered as a high risk consumer. So firstly you will require focusing on making your credit score better. It will take almost 4-8 months on an average and will depend on how critical is your credit report. Once it is improved, you will get the chance of having an approval for your loan and preventing the chances of rejection. If you wait for improving your credit score, you will be able to get better terms for your loan that will decrease the burden of repayment.Everyone does not have a great credit report. But a good thing is it is completely in your power to build your credit report again. With patience and determination your credit score will become better in few months and thus aid you in long term and convenient access to loans.