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- Credit Score & Report
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It is usually very difficult to get a loan with a credit score of 550 because mostly all banks ask for a minimum credit score for approving a loan application. If you are an individual whose credit score is 550, then you need to improve your score before you have applied for a loan. Having a detailed analysis of the credit report will help you in understanding what’s going wrong with your credit score.
Steps to Be Followed to Improve Credit Score
There are some steps to be followed while trying to improve the credit score. The steps make it easy for an individual to work on their credit score and maintain their creditworthiness.
- The first and foremost thing you should be doing is finding out the reason for your low score. After finding out the reason for the low score, you can follow the steps that will help in improving the credit score.
- Maintain a low credit utilization ratio because high credit utilization ratio will lead to lowering of credit score.
- Limit the number and frequency of credit enquiries you make
- Reduce the number of liabilities you have
- Maintain an appropriate credit mix.
Drawbacks of Applying for a Loan with a Credit Score of 550
The drawbacks of applying for a loan with a credit score of 550 will have a long term as well as an adverse impact on the credit score of an individual.
- You will be offered a lower credit limit if your credit score is low.
- You will be charged the higher rate of interest and this will again lead to a default in your payments.
- There are complete chances of your loan application getting rejected if you have a low credit score.
It is always recommended to have a proper check at your credit report at frequent intervals. This will enable to understand the points you need to focus on while improving your credit score. Low credit score also has an impact on the interest rate that you will be charged on a loan. If you have a high credit score, you will be charged a lower rate of interest.
Therefore it should be noted that though it is tough to get a loan with a credit score of 550, it is not impossible. It may require some precautions to be taken before applying for a loan if your credit score is below 550. By taking the necessary precautions, individuals can make sure that their loan request does not get declined and they do not face any problems in the process of acquiring a loan.
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