A 500-credit score is considered among the lowest scores available. The lower the credit score the lower the chances of acquiring any loan.
However, this doesn’t mean you cannot secure a loan with this kind of score. Some government-secured loans like FHA have fewer credit rating requirements and with a good down payment, you can easily get a loan even with bad credit.
Still, make sure to shop around for other loan options before settling for a particular one.
That said, here are a few loan options you can consider and a guide to help you improve your credit score. This link https://cashadvanceloansonline.com/ can also help you find more information.
Your borrowing power determines the size of a loan you can secure from any lender. In this case, having a credit score as low as 500 diminishes your chances of getting a huge loan for a new car.
Luckily, most auto loans are secured by the car they finance, therefore lenders find auto loans less risky.
As long as you have a good down payment or any other form of security, you can secure an auto loan even with a low credit score.
This is another type of loan that can be easily acquired by those with low borrowing power. Personal loans include installment and short-term loans.
Short-term loans are paid in full at a certain date while installments loans are paid in intervals. While short-term loans have fewer credit requirements unlike their counterparts, they charge much higher interest rates.
If your credit score is low, getting a home loan can be tricky. This is mainly because of the high value of the mortgage and the long duration of payment.
Luckily, some loans like the Federal Housing Administration (FHA) have the lowest credit rating requirements, meaning you can still qualify for a loan even with low borrowing power.
Nonetheless, you might need to make a down payment of around 10% as security.
Another interesting thing about the FHA loans is that they do not include risk-based pricing. This means you don’t have o incur high interest rates in the long run.
This type of loan is popular among many. It involves the exchange of valuable items for a certain amount of money which is equivalent to the value of the item.
To get your item back, you’re required to return the money plus interest after a certain period. For instance, if you have a television worth $300, you can exchange it for a small loan of around $200.
The item acts as security for your loan. In case you fail to repay the loan, the lender sells the item to get their money back. Click here to see the types of loans available.
5 Things to do to raise your 500-credit score
Now that you know the various credit options available for people with bad credit, here are useful tips to help you grow your borrowing power.
See this link to learn how you can increase your credit score https://www.cnbc.com/select/easy-tips-to-help-raise-your-credit-score/.
Keep Your Credit Utilization Ratio Low
The lower the credit utilization ratio, the higher the borrowing power. You become more attractive to lenders when your utilization ratio lowers.
This also means you are at a better chance of qualifying for various loans unlike before. Likewise having a lower utilization ratio indicates that you do not overuse your credit cards.
You can lower your utilization ratio by maintaining a low credit card balance, tailgating on the credit account of someone more responsible as well as settling any existing debt.
1. Make Payments on Time
This is one of the simplest ways you can build your credit score. Paying your debts on time is an indicator that you can be trusted with the lender’s money.
Most creditors will conduct a review of your payment history before lending you any amount. You can only get credit approval if your payment history is satisfying.
To ensure that you don’t miss any underlying payment, make sure you have an automatic payment app with you.
2. Pay Down Existing Debt
As mentioned, reducing your debt balance can lower your utilization ratio. This is why you need to pay your debts fully and on time.
You can easily move from a 500-credit score to a higher score in a jiffy by paying your debts. Every credit card comes with a unique interest rate.
Focus on paying debts from those credit cards with the highest interest rates first.
3. Create a Budget
Having a budget minimizes impulse buying. This is why you need to plan your spending. Have a list of things you can afford and leave the unnecessary ones.
Minimizing your expenditure can save you more money and help you grow your borrowing power. If you don’t know how to make a budget, you can try various useful budgeting apps as well.
4. Safeguard Against Identity Theft
Identity theft or fraud can have a negative impact on your credit score. This is why you need a good identity protection agency to monitor your credit report.
Keep a frequent check on your accounts and be on the lookout for any accounts running under your name that you know not.
You risk getting a hike in your credit utilization ratio if the fraudster maxes out your credit cards.
5. Get a Secured Credit Card
You can rebuild your borrowing power by using a secured credit card. Secured credit cards allow you to make a deposit as security for your debts. This deposit allows you to keep track of your payments and rebuild your credit limit.
If you are faced with a pressing emergency and you need a quick loan, but your credit score is low, don’t despair.
You can always choose from the wide range of credit options available for those with scores of 500 or below. while loans for people with bad credit exist, they may require a down payment.
Most lenders will ask you to pay a certain percentage as security for the loan or provide a valuable item equivalent to the value of the money you are looking for. Provided you meet their terms and condition you can easily get an answer to your emergency.