How to Get Loans With Low FICO Scores
Lenders rely largely on your credit history to determine whether they can reasonably expect that you’ll repay a loan. As a result, a low FICO score can be a detriment to getting the loan you want.
If you know that your FICO score is low, but you still want to go after a particular loan, there are several things you can do to improve your chances of success.
7 Ways to Get Loans With Low FICO Scores
1. Keep your FICO score at least where it is by making credit card payments on time.
Making late payments and otherwise giving lenders reason not to consider your loan request won’t help you.
2. Pay off your other debts.
If you have a lot of debt, you’re less likely to get a loan.
3. Get a copy of your credit report and FICO score.
Make sure that there are no errors as these can affect your chances of getting a loan, regardless of whether they’re accurate.
4. Research the potential loan options.
If you have a low FICO score, you’re not going to get a standard fixed-rate loan with a prime interest rate; you’ll need to look elsewhere. Possibilities for a loan include no-credit-score loans and adjustable rate loans.
5. Prepare to put more money down on your purchase.
If you’re buying a home, you’ll increase your chances of getting a loan in spite of your low FICO score if you have enough money to put at least 20 to 30 percent down. Money down means a better chance to get the loan.
6. Stay within your means.
Adjustable rate mortgages, for example, are tempting because they can give you the impression that you can buy more house than you can (apparently) afford. The boom in foreclosures during 2007 and 2008 should convince you not to get in over your head.
7. Continue with your present job unless a better, higher-paying opportunity comes along.
Your work is your key to repaying your loan, so lenders will be wary of loaning you money if you don’t maintain steady employment. Also, the more money you make, the more lenders may be willing to loan you.
Tips & Warnings
Be prepared for the worst-case scenario: high interest rates and a salary that will not be increasing year after year.
Be prepared for the worst-case scenario: high interest rates and a salary that will not be increasing year after year.
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