As per the Consumer Financial Protection Bureau, a 550 CIBIL score is subject to risk and considered deep subprime. The credit score of 579 or lower is categorised as a poor score and not suitable to obtain a loan.
But, with the passing of years, lenders are becoming more flexible and ready to adjust their criteria. There is always an alternate way to get a loan for a low CIBIL score, making it possible to secure a personal loan through other methods. Let’s understand the possible options available that help you navigate the challenges of having a personal loan for CIBIL score of 550.
How to Apply for a Personal Loan with a 550 Credit Score
Securing a personal loan with CIBIL score of 550 requires you to be prepared thoroughly to avoid rejection. Here is the process:
Make your reservation
Start researching for the best lenders who offer personal loan without CIBIL Score. Ensure checking out the reviews on third-party platforms and going through the patterns in the customer's experience. Plus, ensure that the lender you are shortlisting is meeting your requirements and sufficient to fulfil your financial needs.
Try for secured loans
Such kinds of loans are often secured with valid collateral, for instance, a house, a car, valuables, gold, etc. This way, you will be fortunate with good loan terms even though you are risking your assets in case of default on the loan.
Enhance friendship with local banks
It is helpful to have an existing relationship with a community institution because of the flexibility they offer to their close one. They often want to take a holistic look at your financial condition and assess your personal loan application based on not just your credit score but other factors.
Get a co-applicant
Having a co-applicant by your side who has a strong credit score is always a plus. When it comes to applying for a personal loan with CIBIL score of 550, consider any of your relatives or family members to take a guarantee.
How to Enhance Your CIBIL Score from 550
There are many steps that can help you improve your financial profile. Let’s look at a few of the tips to improve CIBIL Score that work more quickly than others.
Keep checking your credit report for errors
Make sure the raw information is coming into use correctly to calculate the credit score. Mistakes tend to happen; therefore, it is mandatory to detect the errors by following the directions on each agency’s website to correct the issues.
Ensure Paying Bills Timely
Always consider paying bills on time to maintain a good credit history. When you have any open past-due accounts, ensure bringing them current and continue sorting them up with timely payments. It will help you to avoid bad credit reporting.
Reduce debt balances
Your credit health is majorly affected by the amount you owe from creditors. Typically, it accounts for 30% of your entire credit score. Therefore, try to reduce your revolving debt balance to under 30 percent. It will help you enhance your credit use and possibly increase your credit score.
Maintain Your Expired Credit Cards
It’s important to keep the accounts active as long as possible with the credit cards that are no longer in use. It helps with your credit history length, which is a key factor in assessing your CIBIL score. If you cancel old accounts, then it can potentially reduce your average credit age, which ultimately lowers your credit score. If the card is no longer functional, consider contacting your issuer to renew it instead of closing the account.
Get a secured credit card opened
Opening a secured credit card can be a wise way to rebuild your credit score. These cards require a cash deposit as collateral, which functions as your credit limit. With the proper use of this card with responsibility and making timely payments, you demonstrate to lenders that you are a responsible borrower. It can gradually improve your CIBIL score.
Peer-to-peer lending platforms
Peer-to-peer (P2P) lending platforms are another viable option to help people obtain personal loans without CIBIL score. P2P lending platforms let you connect directly with individual lenders who may be more willing to take on higher-risk loans. Though it might offer higher interest rates than traditional banks, it will help you secure a loan even with a low credit score.
The bottom line
Seciuring a personal loan with CIBIL score of 550 may be challenging but possible. With in-depth, correct research and the above-discussed steps, one can easily increase the chance of seamless loan approval. Also, do not overshadow the value of a good credit score with a few of the responsible financial habits. It will be a great future help.
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