Your credit score plays a major role in determining what types of loan products you qualify for, as well as the funding amounts, interest rates, and payback terms you may receive with a given loan product.
Typically, borrowers with a higher credit score are eligible for more loan types, higher loan amounts, lower interest rates, and more convenient payback terms. However, that doesn’t mean there aren’t loan products available for people with a lower credit score. In fact, there are even bad credit personal loans available that can help you improve your credit!
Credit scores can be broken down into four to five basic tiers. Here’s how they work:
- Tier 1 Credit – Considered exceptional credit, with scores ranging from 800 – 850.
- Tier 2 Credit – Considered very good credit, with scores ranging from 740 – 799.
- Tier 3 Credit – Considered good credit, with scores ranging from 670 – 739.
- Tier 4 Credit – Considered fair credit, with scores ranging from 580 – 669.
- Tier 5 Credit – Considered poor credit, with scores ranging from 300 – 579.
If you have a credit score of 480, that would put you in the tier five credit tier. People with tier 5 credit may have trouble finding approval for certain types of loan products, such as traditional loans with a bank. But, there are bad credit lenders who can offer installment loans to borrowers with just about any credit score. These types of loans can give bad credit borrowers the opportunity to take advantage of emergency funding while also allowing them to improve their credit scores over time.
How can a personal loan help borrowers improve a tier five credit score of 480? To start, personal installment loans are known for having flexible payback terms. That means you can space out your monthly installments, so your payments stay manageable. When your payments are small and convenient, you can easily improve your payment history by keeping up with every monthly installment. Then, when you pay back your Loan balance, you will see an improvement in your debt-to-income ratio. By having a positive payment history and lowering your debt-to-income ratio, you may see an increase in your credit score the next time you pull a report!
Credit Education & Credit Reporting