Discover what it means to have a credit score below 445, how it's calculated, what loans you can get, and how to improve your 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.
What does it mean to have a credit score under 445
Similarly, most of the banks will not be willing to give this person the credit or loan. With such a credit score, the person is required to use the non-conventional means of the getting credit, loan or money.
You can go to the credit unions and become a member. Their loans conditions are easy to manage, and you are not required to pay the high cost of debts for such loans. You should work on improving your credit score to be able to have a better credit position in the future.
Credit cards with a credit score under 445
Getting credit cards with a credit score under 445 but over 350 can be difficult due to the credit history that the person has.
Acquiring a credit score under 445 but over 350 means that you have done something wrong to ruin your credit history. But this doesn't mean that you no longer have the chance to have a credit card. There are a few card companies who are willing to compromise with your credit score.
Credit One Bank Unsecured Visa
Credit One Bank Unsecured Visa will let you earn 1% cash back on groceries and gas purchases. They offer a payment date that is flexible, to ensure that you can pay your bills on time. Their regular APR ranges from 15.65% to 24.15%.
Total Visa Unsecured Credit Card
Total Visa Unsecured Credit Card will require you to have a checking account. The monthly payments are manageable so you don't have to worry about anything.
Car loans with a credit score under 445
People who are planning to get car loans with a credit score under 445 but over 350 are having a hard time getting approved. The good news is there are now different options that you can choose from for the car loan that you need.
Of course, there will still be lending companies that can provide you with the loan that you need. But this will always come with a higher interest rate. Find out more about the different companies that can provide you your needed car loan.
Hard Money Lender
Hard Money Lenders usually don't do background checks to their clients, which is why they offer loans with a higher interest rate. Plus, some of them ask for collaterals just to ensure that they have something to repossess if you run away from your obligations.
Subprime Lender
Subprime lenders can provide you with a loan, but the interest rate will highly depend on your score. The higher your score, the lower the rate, and vice versa. But don't worry because their prices are mostly affordable for everyone.
Mortgages with a credit score under 445
If you have a credit score that is below 445 but above 350, you lie in the lowest category on the credit score grade scale. Most of the banks will not be willing to lend you credit. Therefore, first, you should look for ways to improve your credit score. A higher credit score gets quicker approval for loans and can get you the lower cost of debts.
You can check with credit unions. If you become a member of one, they give you home loans at very low-interest rates. Credit unions are not for profit organizations.
You should also search for online lenders who are willing to lend with some conditions without taking into consideration your credit history.
Home Loans with a credit score under 445
As your creditworthiness is low and your credit history will be unacceptable, most of the banks will be skeptical when you apply for home loan. Your automated loan request will most probably fail. However, you can do it manually after meeting certain criteria.
With a score below 445, you might not qualify for the FHA loans. You can look for local banks that have a low threshold on credit scores. You can also consult an attorney or look for home counseling.
Online lenders may be your best option in the given conditions. They pay little interest in your credit scores and have acceptable terms and conditions for the loans. They might require some promise and extra payments on your home loans.
Personal Loans with a credit score under 445
When you have poor credit, you should only seek for a person loan in times of necessity. There is no need for you to borrow large amounts that you may not be able to repay. Doing that damages your credit further. However, this does not prevent from taking a loan to finance your needs.
Third party loan
You can convince another person to obtain a personal loan on your behalf. This unorthodox way is a bit complicated since you have to find someone who has trust in your ability to service the loan. They risk damaging their credit since the loan is issued under their names.
Guaranteed loan
You can find some people to sign your loan application form assuring the bank that you are in a position to repay it. A guarantor is an individual who gives surety to a financial organization on loan repayment. When you fail to pay it, the guarantor(s) have to pay it as if it were their own.
Friends and family
Whenever you hit a dead end financially, you can always fall back to your close ones for financial assistance. It is an informal loan deal that is largely dependent on your agreement with them.
Things you can do to improve your credit score of 445
It takes a long time to improve your credit score especially if you a regular loan user. You need to be consistent in the measures you to take to improve it. It is because a credit score takes into account both the previous behavior of the debtor, as well as their present practices. As such, it takes a while to negate the past undesirable credit practices.
Get rid of credit card balances
You can do this by eliminating unnecessary balances, which are the small balances that accumulate on your credit cards. It is because when determining your credit score, the number of credit scores you own that have balances are considered. Collect your credit cards and pay off their balances.
Monitor your credit card balance
Your credit score puts into consideration the amount of revolving credit you have against the amount you are using. It is an advantage to your rating if the percentage is lower with 30% or lower being the optimum. Pay your credit card balances regularly.
Include old debt in your report
Old debt isn't necessarily bad for your rating. It is not a good idea to instruct your credit bureau to delete old debt items especially if they were paid off efficiently. Bad debt usually gets off your report after seven years.