The credit score is the most important thing that is checked while sanctioning a loan. Having a bad credit score can reduce the options for taking loans. But there are many lenders who lend money for bad credit too. They consider different factors for lending money. If you have bad credit scores, there are the Best Bad Credit Loans 2022 in the market.
What is a bad credit score?
A credit score is a figure that decides your creditworthiness to get a loan. It is the ability to repay based on the history of debts and income. The score’s magnitude ranges anywhere between 300-900. A credit score above 750 is considered good credit. It is approved by the banks to get a loan. If the credit falls between 300-500, it is classified as bad credit.
Factors that can influence the credit score
- Payments not paid on time: Consistent delay in payments or EMI can affect the credit score. Pending debt or credit payment has an impact on the ability to repay. The longer the payment is due, the lesser the credit score.
- Applying for a loan at multiple places: Taking a loan from multiple places and being unable to repay can lower your credit score. Owning multiple credit cards has the same impact.
- Ratio: A ratio of credit used to available credit can affect the credit score.
Types of loans for bad credit
Getting a secured or unsecured personal loan
Secured loans are loans that require some collateral that gives some guarantee to lenders. On the other hand, unsecured loans do not require collateral. Repayment on time can work as credit builders.
Auto loans
Auto loans fall under secured personal loans. The car serves as a guarantee to the lender. For this loan, the interest rates are usually high.
Payday loan
The loan directly gets cuts from salary on the day of payment. These loans don’t depend on credit scores. Instead, they check the current financial status of the person. One can get easy access to payday loans and have a short tenure.
Factors to check before taking a bad credit loan
- Rates of interest: Having high rates can increase the repayment amount. It’s better to find lenders with low interest. It is advised to look for lenders with fixed rates.
- Documents and terms: Check for late repayment fees. There can be additional hidden charges, too, that one must be careful about.
- Beware of scams: There can be many scammers that can take advantage of the situation. It’s necessary to do a complete check before applying for a loan.
How to improve your credit score?
The main important thing to improve the credit score is repayment on time. Clearing any past dues can help improve the score. Not applying for more credits can turn out to be beneficial. Clearing the credit card bills can help to improve the credit score. There are many best bad credit loans 2022 available that can help to increase the score.
