Can I Get A Loan With A 500 Credit Score?

Answer for "Can I get a loan with a 500 credit score?"

Steve Davis real estate agent
  Realty Resource Connection

Yes, you can! Now, it depends on what type of loan you are looking for. Is it a home loan? Or a payday loan? It is possible to borrow money even with a FICO score of 500 points.

So, when you have bad credit, you probably don’t want to have your credit checked during the approval phase. Using a personal loan as a down payment for a home loan is quite unrealistic also since conventional home loans usually require a minimum credit score.

With a credit score of 500, you may qualify for an FHA home loan, but you will have to pay 10% down. The interest is usually between 1 and 2 percentage points above the prime rate. If you want to be approved for a VA loan with no down payment, then you need a minimum score of 620. USDA loans also have a minimum credit score requirement of 640. Then, even if you want to pay Private Mortgage Insurance (PMI) on a traditional mortgage to lower your down payment, it is very unlikely that you will be approved with 500 points on your credit report.

But why do you have only 500 points? Have you been over indebted? Or have you already been through the home-buying process and lost your previous house during foreclosure? Or, even worse - have you declared bankruptcy?

A 500 credit score can also mean that you have been late on your payments. Are you looking for a foreclosure bailout loan? To be approved for such a loan, you will need at least 40% equity in your property and a credit score above 500. To qualify for debt consolidation loans or mortgage refinance you also need a higher score of at least 580 points. There is hope after foreclosure! You still have at least two options left.

The first option is the signature loans - a type of loan that doesn’t analyze your credit history. It is based on your promise to repay the loan, so it has quite a high cost, similar to payday loans. Signature loans are unsecured debt and can be repaid over a period of 5 years. In some cases, a co-signer is a must. However, even though no collateral is needed, your debt-to-income ratio may still count and should be under 43%.  

The second option is to borrow from your family and friends. They will probably charge you no interest and they will not check your credit score either. They already know what have you gotten yourself into. However, it’s important to do everything that you can to repay it and maintain your credibility, just in case. You might have to borrow again from them!

Of course, you may find more flexible lenders, but you should be very careful! Most loans that require little proof of your ability to repay are extremely expensive and you may find yourself head over heels in debt for a longer period if you only miss one payment! Most credit sharks wear suits, you know?


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