Find out the tips on how you can get loans without a credit score.
People without credit score can still avail of loans. If you're not familiar with how to do it, then the information below will surely be helpful.
It is possible to get loans without the credit score, but not everyone is willing to grant loan applications without credit score. It may require a lot of work to be able to get one, but once your application got approved, then you wouldn't be having problems anymore. Below are some of the tips on how you can get a loan without credit score.
Be an Authorize Credit Card User
Being an authorized user of your family member's credit card will help you to gain the credit score that you need to be able to get a loan.
Provide Down Payment
Another way on how you can get a loan without a credit score is to provide the lending company a down payment. This can range from 10 to 20% depending on the amount that you are borrowing.
Financial Documents
Providing different financial documents is necessary for you to be able to show to the company that you can pay off the loan that you are trying to borrow. The document can be a pay slip or a bank account statement.
Personal loans without credit score
Very few financial institutions would give you a personal loan without checking on your credit score. If you have never taken a loan, it means you don't have a credit rating. It becomes difficult for these organizations to assess your suitability for a loan. You have several options:
Title loans
You can hand over the title of your car as security for a personal loan. A title loan can provide with higher amounts and longer repayment period due to the security you provide. The downside is that you lose your car if you fail to repay the loan.
Pawn shop loans
A pawnbroker can give you a personal loan if you hand in your valuable items such as jewelry and electronicredit score. Your valuables are held for the period that the loan is provided to you.
Micro-lenders
These are online lenders who offer personal loans directly to individuals who need cash urgently. The bureaucracy experienced in conventional financial institutions is minimal. Popular micro-lenders include LendingClub, Kiva, and Prosper.
What is a credit score
A credit score is needed for you to be able to get a loan or credit. The reason behind this is because it will help financial institutions to determine your creditworthiness. They will also see every loan that you made and the payment history that you have. Find out more about it by reading the information below.
Credit scores are calculated based on the proprietary algorithm. This will include the person's outstanding debts, payment history, and the length of the individual's credit history.
Credit scores can range from 300 to 850. The higher the individual's score, the lower the risk. People who have lower credit scores are considered high risk, which will make lending companies ask for more requirements.
About Fico scores
Fair Isaac Corporation is the one who established FICO, and it is one of the most commonly used credit scoring systems today.
According to FICO, 90% of the most reputable and respected lenders today are making decisions according to this kind of credit scoring system. Get to know more about Fico scores by reading the information below.
How are credit scores calculated?
The weight of each of the five categories are; 30% of amount owned, 10% is for the new credit, 15% accounts for the length of credit history, 10% is the credit mix and the last 35% accounts for the person's payment history.
The FICO score takes into consideration positive as well as negative aspects of the credit report. The percentage or the weight of any of the categories mentioned above may differ from a person to another depending upon the information available in the credit report.
The FICO score takes all of the information from your credit report. However, the banks or any other lending institution might look at your income, type of credit and employment history when you apply for a loan or mortgage.
Once a certain lender asks for a client's credit report, they can also ask for the Fico score. Other sources say that your Fico score will include 35% of your payment history, 30% of your credit utilization, and 15% as to how long have you been borrowing.
Explanation of credit score ranges
It is important to know the category that you fall into when it comes to credit score for you to be aware. The range of a credit score can go from 300 to 850. Always remember that the higher your score, the higher the chances of you to qualify for a loan. There will also be instances where a financing company is okay with 650 scores, while the other is fine with a 750 score. It will all depend on the lender itself.
A lender or a bank will check your credit score if you qualify for the application that you are requesting. Here are some of the credit score ranges that you should know.
Bad credit score
People with a credit score below 579 is known as high risks. Foreclosures, poor payment history, and bankruptcies are the reasons why people fall into this category.
Good credit score
A good credit score ranges from 680 to 719. People with this credit score can expect approvals and interest rates that are better.
Very Good
A very good credit score ranges from 720 to 799. People with this credit score is known to be small risks, and they often get loan amounts that are higher than usual.
Excellent
An excellent score ranges from 800 and above. Financial freedom is expected to people with this score.
Things you can do to improve your credit score
Having a bad credit score is similar to having poor health. Therefore, you need to take measures that ensure you are continually improving on it. The most efficient way of repairing bad credit is good management over time. Improving your credit score is necessary for you to be eligible for better terms and rates for loans in the future.
Regular credit report checks
You are advised to monitor your credit report regularly to see if it has any errors. A credit report brings you up to speed on your status as a debtor. Ensure that the payments are reported correctly and the amount owed to each creditor is correct. Errors must be disputed to your credit bureau promptly.
Reduce your debt
Most people usually take loans just because they are eligible for them without considering the potential damage to their credit score. For a start, you can reduce your reliance on credit cards. Design a plan that ensures you give priority to your debts that have the highest interest rates.
Payment reminders
If your monthly premium is not automatically debited from your account, you need to set up a payment reminder. Timely credit repayment improves your credit score over time. Some financiers usually send emails or texts to their clients to make payments.