If you are considering signature loans, but you had bad credit, it is likely to have an adverse impact on your ability to obtain a such a loan. Well, actually, it isn’t your bad credit that’s the problem. It’s your credit score.
Signature Loans Rely On Decent FICO Scores
Your credit score will affect you signature loans. Your credit score is a numerical value based upon the statistical analysis of your credit files. It is used to determine your credit worthiness. Lenders use this numerical value to estimate the likelihood that you will pay your debts in a timely manner. Your credit score is generated from information obtained from several credit reporting agencies.
Lenders, banks, and credit card companies, use these credit scores to determine the potential default risk that might arise by lending money to you. Naturally, lenders want to minimize their risk. The lower the credit score, the worse perceived credit risk that you are. To offset the increased risk, lenders will charge higher interest rates to those with lower credit scores. Conversely, the higher your credit score, the lower your interest rate can be, as lenders feel more confident that you will be able to repay your loan.
You should check you credit rating at least once annually. Checking your credit might help you to head off identity theft. Suffering identity theft can lead to worsening credit scores. In the worst such cases, you could lose your assets and/or be left with bad credit. You might only be able to secure signature loans due to bad credit at very high interest rates. Lower credit scores mean higher interest rates. Below is a recent table from Equifax, one of the leading credit bureaus which clearly indicates that the higher your credit score, the lower your interest rate will likely be.. You can clearly see that avoiding bad credit is the key to securing loans with reasonable interest rate. At the extremes, the difference can be more than 4%. Here’s the table:
Credit Score….. Avg. Rate
Don’t procrastinate. Check you credit score right now! In the same way that a bad driving record impacts your teenagers car insurance rates, a bad credit score has a direct impact on your ability to borrow money. You need to know your credit score. How can you do this? As mentioned earlier, Equifax is one of the three major credit reporting agencies. Your credit score will have a direct impact on whether or not you can get signature loans and what the interest rate will be.
Signature loans can be difficult to get. If your credit score is low, it’s till possible to get such a loan, it may just take more work. Check out this list of bad credit signature loan lenders. You should be able to find signature loan through one of these sites.
- Charge you late fees
- Send your account to a collection agency
- Report your information to a consumer reporting agency, which may negatively affect your credit score
- Offer to renew, extend or refinance your loan, which may cause you to incur additional fees, charges and interest