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Articles » Low Credit Score Loans | | Determining Factors to Qualifying For a Loan When You Have a Low Credit Score |
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Just because you can find a lender who gives out loans to people with low credit scores does not mean that you necessarily qualify for a loan. There are still certain factors that are taken under consideration before a bank, mortgage broker, or finance company will provide you with any kind of financial assistance. Your payment history, possible defaults, and gainful employment are some of those factors.
Payment history affects your credit score, but many lending institutions may ask you for unreported items such as rent or utility payments. These show the ability for a customer to make payments on time and determine credit worthiness. Sometimes a low credit score may be the result of financial hardship in your past, so lending institutions will look at present spending habits when making a decision to grant you a loan.
Defaults on payments, even if they are in the past, can be used against you when you are applying for credit. Bankruptcies, foreclosures, and repossessions are big hits on your credit score and even if you have managed to get it back up into the 500’s again, most banks and credit unions will not give you a loan. The exceptions to this would be secured loans or FHA loans that are guaranteed by HUD.
Proof of employment and income is also a factor used when determining if you are eligible for a low credit score loan. Any lender will want to have some type of evidence that you can afford the payments if they do give you a loan. Banks often require that you open an account and have your paycheck direct deposited so they can take their monthly payment directly out of your account.
Getting a loan when you have a low credit score is difficult. Your best option, if you can, is to wait and pay off some of the negative items on your credit report first. You can also use your low credit score loan funds as a consolidation loan to pay back high interest credit cards or outstanding loans. If you state that this is your intention when you apply for the loan, you may have a better chance of receiving a positive response.
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