5 tips for getting a loan if your credit score is in the 600s
If you need a loan and your credit score is around 600, you might not be sure about your chances of getting approved. You don’t need to worry. Based on the correct score, the 600 are in the fair and good credit ranges. With either one, it is possible to get approval from multiple lenders.
Even if you are well above the credit score you need for a personal loan, the loan process is still important. You don’t want to pick the wrong lender and get turned down or end up paying a higher interest rate than you need to. Follow these tips to get the loan you need for the best price.
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1. Find lenders with minimum requirements that you can meet
Each lender has their own minimum credit score for potential borrowers. Some are open to borrowers with a score of 580. Others may require a score of 660, 680 or higher. By choosing a lender with a minimum requirement that you can meet, you have a higher chance of being approved.
Your FICO® score is the type of score that matters most. This is the most used score by lenders, so when you want to get your credit score, try using a method that provides your FICO® score.
If your credit score is in the 600s, start by looking at personal loans for fair credit. The fair credit range is 580 to 669 under the FICO system, so you should find lenders that work for you. If your score is in the 600s, you can even qualify for the best personal loans.
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2. Check if you are pre-approved
Most lenders offer online pre-approval tools. These allow you to check loan rates without affecting your credit score.
To use a pre-approval tool, you need to enter some basic information. Lenders usually want your name, address, income, desired loan amount, and social security number. When you submit the form, the lender performs a gentle credit check on you. Then it will let you know if you are pre-approved for a loan. If so, it will tell you the amount and the interest rate you could get.
A personal loan pre-approval is not a guarantee. But it does give you an idea of which lenders will approve you and what kind of rates you can get with each.
3. Find a co-signer
A co-signer is someone who agrees to take on a loan with you. For this reason, the lender can use the information of the co-signer to decide if they will approve the request and what kind of rate they will offer.
Applying for a personal loan with a co-signer who has a higher credit rating than you could help you get a bigger loan, a lower interest rate, or both. The challenge is to find someone to do it for you. The co-signer is taking a risk because they will be just as responsible for the loan as you are. If you get a loan with a co-signer, make sure you always pay on time to avoid hurting both of your credit scores.
4. Pay off your credit card balance before applying
Raising your credit score before applying for a loan can make a big difference. Even a small increase could help you get a good interest rate that will save you hundreds of dollars.
A quick way to increase your credit score is to pay off your credit card balance. This is due to a factor called the credit utilization rate, or the relationship between your card balances and your credit limits. For a good credit rating, it is good to keep this ratio below 30%. So for every $ 1,000 of credit you have, don’t use more than $ 300.
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Want to pay off your debts faster? Check out our list of the best personal loans for debt consolidation and lower your monthly payments with a lower rate.
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The great thing about using credit is that only the current number counts. Let’s say you have 70% credit usage. If you pay up to 25%, your credit score will increase within a month when the credit card companies report your new balances.
5. Beware of predatory lenders
Unfortunately, there is no shortage of predatory loan offers. Lenders offering payday loans and auto title loans are two examples. They often charge extremely high interest rates, with lenders in some states charging APRs above 500%. The reason they are able to attract consumers is that they have fewer minimum requirements. Some will approve borrowers without even checking their credit rating.
Research any lender you are considering to see if they are trustworthy. Before accepting a loan, review the contract, including the repayment terms and the interest rate. If the cost of the loan makes repayment nearly impossible, keep looking for other options.
A credit score in the 600s is enough to qualify for a loan. Try to pay off all credit card balances to get your highest possible credit score before you apply, or see if you can find a co-signer to help you. After that, just compare your options and get the amount you need at the best possible rate.