In today’s day and age, there are few major purchases that can be made without taking out personal loans. Anything that’s a major investment, whether that’s a college degree, a new car, or a new business, requires a large sum of money that few people have ready at hand. Personal loans for fair credit are the perfect solution to this modern problem. In fact, these loans are some of the easiest to understand and acquire. With the right knowledge about personal loans in general, you can decide if this is the right path for funding your needs and goals.
Why Get Personal Loans for Fair Credit?
Before diving into the different types of personal loans, take a look at why you might need a loan in the first place. Personal loans can be used for whatever you’d like. Think of it as a little extra help from a lender or bank to get you where you need to go. Personal loans can be used towards anything from school to paying off personal debt. With these loans, you have the freedom to use the money you receive in any fashion because you don’t pledge collateral for it, nor do you agree to use it for a specific purpose, like student loans. Now that the basic concept of personal loans is out of the way, what’s the difference between fair credit and poor credit?
Different Types of Credit
The way you use your credit card and make subsequent purchases and payments reflects your credit score. When lenders and different loaning agencies look at your credit, they’re looking at your credit card history. Your credit score informs these entities of how well you make your payments, as well as other information like the diversity of your credit card accounts and the number of inquiries for your credit report.
Every lender or business may have their own credit scoring system, but generally speaking, 780-850 is considered an excellent score, 661-780 is good, 601-660 is fair, 500-600 is poor, and 300-499 is a very poor credit score. That being said, you’re more likely to get competitive loan offers with smaller interest rates if you range in the fair to excellent credit score ranges.
What Affects Your Credit Score?
If you want to start a business, but find that your credit score is less than perfect, there are a few different factors you can work on to increase your credit score. The factor that affects your credit score the most is your payment history for loans and credit cards. If you keep missing payments, your credit score goes down. How much you use your credit card also helps your score go up or down. If you’re constantly maxing out your credit card, it indicates to lenders that you might overspend and subsequently miss a payment if they give you an installment loan.
Additionally, the number of inquiries, or requests to check your credit score, also affects your overall rate. When your account undergoes a hard inquiry, which is a credit check by a lender for a mortgage or car, this reflects on your account for at least two years. Checking your own credit score doesn’t change your overall score, but having several hard inquiries does. These factors, as well as a few others, can cause your score to fluctuate and go from fair to poor, or vice versa, within a few payment periods. Your credit score is the first, and often last, thing lenders check when they consider giving you a loan. Lenders are more likely to supply personal loans for fair credit score holders, so it’s important to keep your score up. If you’re worried about your credit score, talk to your banker to discuss ways to remediate and improve your overall score.