Are you one of the millions of Americans struggling with the consequences resulting from low credit scores? Many people use credit without understanding what the criteria are for maintaining a good credit score.
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Negative credit scores result from late payments, missing payments, too many inquiries on their credit reports, or consumers allowing their accounts to be sent to collections rather than paying before action is taken.
Many lending companies are willing to take a risk on a customer with a low credit score. In fact, some companies cater to people in this position. This article will discuss options for those with low credit scores but need to borrow money for a specific purpose.
What is a Credit Score, and How Can It Be Fixed?
It is essential to understand what determines a bad credit rating or score. Credit scores are also called FICO Score, ranges from 300 to 850. Per Experian, one of the credit reporting agencies, a credit score of 660 is considered bad or fair. [1] People with this score or below are referred to as subprime, as they will probably have difficulty in repaying the loan.
Credit scores tell companies how likely they are to honor the loan agreement. A low credit score can be increased by staying below credit limits, making payments on time, and not applying for loans and credit cards within a short period of time.
Companies that Work with Low Credit Scores
Lenders and banks can be different when it comes to their requirements for loan approval. Some banks have programs for customers with a challenging credit history, but they do not risk it. Applying for loans can hurt your credit score, making it necessary to know which companies will likely approve you and ones that would not as they require a higher credit score.
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Upstart
Upstart is a good option for those looking for a loan with a low credit score. [2] They allow credit scores as low as 620 to apply. They are willing to take a risk, so this should be one of the first options explored. The loans Upstart offer range from $1,000 to $50,000 with no prepayment penalty, meaning that if you pay off the loan early, it will not hurt you in the way it does with some companies.
Upstart offers next-day funding, which is great if there is an immediate need. They also offer debt consolidation loans which are one loan to pay off multiple debts, often with a lower interest percentage rate.
This is what some have to say about Upstart.
Forbes
“Many people are growing increasingly savvy and want an alternative to high-interest credit cards.”
Wall Street Journal
“Upstart’s model has expanded credit access and encouraged other lenders to explore ways to lend to more people with no or limited credit history.”
CNBC
“Rather than looking at a credit score alone, Upstart evaluates education, area of study, and job history when considering applicants.”
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FreedomPlus
FreedomPlus does not list the scores they work with, like many companies. But lower credit scores are accepted, with the loan limits determined by the state rather than having a set dollar amount they lend. FreedomPlus offers a convenient online application, with results to the user in 48 hours or less.
With FreedomPlus, the APR can go to 29.99%, with no loan offers in Arizona. [3] This is a good option for those needing a loan but remember that a lower credit score will result in an APR near 29.99%.
FreedomPlus bases its decisions on an individual’s circumstances and needs. The loans are arranged by Freedom Financial Asset Management, affiliated with Freedom Financial Network who specializes in comprehensive consumer advocacy services.
You can apply for a two to five-year loan and be out of debt decades faster with less money spent than with credit card minimum payments.
Lending Club
Lending Club is a well-known loan option for people struggling with debt and needing a loan between $1,000 and $40,000. It is the largest online lender in the country. A loan from Lending Club can range between 5.99% and 36.89%, determined by credit score. A borrower must have a credit score of at least 600 to be approved.
Lending Club relies on investors to fund loans and make lending decisions. [4] It means they use more than a formula to make the decisions, which makes approval easier. They provide credit card consolidation loans, balance transfer loans, debt consolidation loans, and home improvement loans.
Peerform
Peerform is another company that uses investors to fund loans providing flexibility in making loan decisions. [5] The application process is quick and notifies you within 48 hours if you have been approved.
Peerform offers debt consolidation loans and looks at income, employment, and overall budget to make decisions.
Their loans are unsecured, no collateral required, fixed-rate interest at 5.99% to 29.99%, the application process is fast and free, and they offer easy monthly payments.
Traditional Loan Options
Some traditional lenders will work with customers with lower credit scores. One of them is USAA Bank. They do not offer debt consolidation loans or student loans, but personal loans up to $5,000 for any reason will be considered.
Wells Fargo Bank is another example of a traditional lender that will work with customers with lower credit scores. They offer debt consolidation loans with an APR depending on your credit score. While you may not get approved for a loan with Wells Fargo with a low score, it may be worthwhile checking it out.
Requirements for Loans
You must provide certain documents to verify your identity and your ability to repay the loan. You need an official form of picture ID, most use a driver’s license, but any ID with a photo will be accepted. You also need to provide a piece of mail with your name and current address, proof of income, and you may be asked about your budget. These steps are taken to prevent identity theft and to ensure the money will be paid back.
Getting a loan can help in many ways. For example, buying a car, repairing your home, or any other purpose. If you find yourself with a low credit score and in need of financial help, these companies and others can offer you relief.
