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Loans With 400 to 500 Credit Ratings
Getting a personal payday loan is possible even if you have a credit score of under 500. This is because payday lenders tend to use alternate credit sources other than the major 3 bureaus. They mainly look at your ability to repay the loan. This means that they look at your income and determine how much you can reasonably bower and expect to be able to repay.
They also want to be able to prove who you are and see a checking account where they can deposit the money and collect the repayment. So, basically you need a source of income, an identification and a good checking account. Have those things and your odds of approval are very good, even with credit scores between 400 and 500.
Low Credit Score Loans
So, how can these lenders approve you for loans with credit scores of 400 – 500? Easy, they look at your ability to repay and they obtain your checking account information so that they can automatically fund your loan and withdraw the repayment.
Lenders also charge fees for their loans that can be high, to cover the risk. A loan might, for example, have a fee of $20 per hundred dollars borrowed. In that case, if you need 300 dollars, you would repay $360. Doesn’t sound too bad but if you factor in the short loan terms, the effective loan percentage rate is quite high. APR’s can be 400 percent or even higher.
Still, if you need money in a hurry and you have a lower than average credit score, they might be a good choice for you. Just go in knowing that the loan is likely going to be costly.
Is This The Best Option For Your 400-500 Score?
This is something that only you can decide. There are fees associated with payday loans and they are often due in under two weeks. You need to decide if the fees are worth it and if you will be able to repay the loan when it is due.
The last thing that you want to do is be in the position where you would have to take out another loan to pay back this one or extend your current loan. This is called the payday loan trap and it occurs more often than you might think.
Improving Your 400 – 500 Credit Score
After you take care of your current personal loan needs, your next task should be improving your credit rating. A score of 400 to 500 is very low which, as you already know, is bad thing.
The good in all of this is that improving such a rating is rather easy. In no time at all, you should be able to get your score up into the high 500’s or perhaps better. Here are some easy things that you can do to improve your credit rating.
Pay Your Bills On Time
One of the biggest factors in your rating is paying your bills on time. Chances are good that if you have a credit score of 400 or 500, you have a few 30 or even 60 day late strikes on your report. You might even have some charge offs where the creditor has completely written off the debt.
To remedy this, you need to pay your bills on time without letting them go over 30 days past the due date. Do this for 6 months in a row and you should start to see a significant improvement to your score.
As for any charge offs that you might have, how you proceed will depend. If the item is fairly new and you can afford to pay it or negotiate with the creditor, this might be the thing to do. If the charge off is fairly old however, you might be better off just letting it drop naturally, it will drop off your report after 7 years.
Lower Your Credit Card Balances
Another thing that the bureaus look for is the amount of available credit that you have. Ideally, your credit cards should have a balance of under 30%. This, of course, also gives you money on your cards that is available in the case of emergencies.
Getting below 30 percent might be intimidating, but don’t think that it is an all or nothing thing. Your score will improve as your balance drops. If you have 10000 dollars in credit and are charged up to the max, do not think that you need 3000 dollars in credit utilization to see results. Your score would improve when you hit 9000 and then 8000 and then 7000, etc.
Dispute Incorrect Credit Information
Pull your credit report and look for inaccuracies. You are allowed one free credit report every year, so you can go directly to the credit agencies to do this. You can also join one of the free credit report services like Credit Karma.
Dispute anything that you think is wrong and if the creditor does not respond with proof within 30 days, it must be removed from your report.