If you are looking to purchase a vehicle or home and have a 580 credit score, it might be difficult to find financing options.
Bottom line is the better credit you have, the more likely you will be to qualify for a loan. Some Credit Reporting Bureaus such as TransUnion, Equifax, and Experian gather your credit information, come up with a credit history report then award you a credit score which ranges from 300 to 850 points.
A 580 credit score is in the subprime category which is any score below 640. This means you’ll pay higher interest rates when approved for a loan limited credit options available.
Obtaining a Loan with a 580 Credit Score
In order for you to qualify for a loan with a 580 credit score, you may need to secure the loan.
This is where you pledge an asset you own like a car or property in exchange for the loan amount should you fail to pay.
Alternatively, you could have a co-signer with you who will guarantee the debt will be paid off.
Either way, here are a few steps you can try to improve your chances of qualifying for a loan.
(1) – View Credit Report
Ensure that you obtain access to your credit score and report. Also make sure that all this information is correct, accurate and up-to-date. In the case of any errors with your report, there are online forms you can fill out on a bureau’s website to file a complaint have the report corrected.
(2) – Pay Down Debt
Lower your debt-to-income ratio as much as possible. Whether they be lines of credit or loans, do everything you can to make timely payments and chip away at any debt you’ve accumulated. Also, you should always limit all credit card balances to no more than 30 percent of the card’s limit.
(3) – Shop Around
Conduct a little bit of research on the kind of loan that you’re searching for before choosing a financing option.
No matter if you’re in need of a vehicle loan, a mortgage or a personal loan, get all the information you can on available loans, their associated timeframes for repayment and the terms and conditions.
Different lenders usually have varying credit requirements and whether you do not qualify at one lender does not mean others will deny you.
(4) – Increase Savings Rate
Improve your savings rate as you may be required to provide a larger down payment to be approved for the loan with a credit score of 580. When you actually apply for the loan, first make a down payment or even offer to make a larger down payment.
The more capital you invest upfront will grant your potential lenders confidence in giving you a loan. Also, ensure that you secure the loan since this means that the lender has some form of protection in case you default, seizing the collateral you provide.
(5) – Seek Help
Last but not least, get a cosigner such as a friend or family member with a credit score that is high enough so as to qualify for a loan by themselves. A cosigner helps guarantee the loan by helping you sing documents and they will be responsible for payment if you default.
Avoid Excessive Credit Inquiries
Finally, while it might seem like a good idea to talk to the lender getting as much information as you can about the requirements, be wary not to fill out a loan application until when you are ready. Each application sparks an inquiry on your credit which can lower your score.