If your credit rating is not as strong as you’d like it to be, you may be tempted to take on low credit score loans. However, it’s important to fully understand the implications of getting such loans before making a decision. Ultimately, it’s best to take a step back and evaluate the reasons for having a less-than-ideal credit score, so you can take the necessary steps to boost it.

As you read along, you’ll get insights into what factors can harm your creditworthiness and how you can conveniently check your credit score to build a better credit profile.

As there is a lot of information that makes up a single credit report, there are also many factors that cause low credit scores. If you’re interested in taking out low credit score loans, knowing these factors can help you determine the reasons behind your low credit rating and make more informed decisions.

One of the reasons for a poor credit rating is missed debt repayments. Any repayments you did not make two weeks after the due date are considered missed and are included in your report. It would still affect your rating even if you paid your credit provider after this timeframe.

In addition, non-repayment of debt, or a ‘default’, will also negatively impact your credit score. For example, your utility and phone service provider can report defaults to a credit reporting agency if you’re sixty days past your due date and if you owe them $150 or more. Just note that you’ll receive prior notification before your provider does this.

Applying for numerous credit opportunities can also adversely affect your credit score. Each application you submit, as well as inquiries made by providers, will be recorded on your credit report. And if you pursue multiple credit options within a brief period, such as low credit score loans, it may give agencies the impression that you are under financial strain.

Court judgments on your credit report indicate risk and can lower your score. Bankruptcy records also harm your credit score and remain on your report for five years from the bankruptcy filing or two years from the discharge, whichever is later.

Incorrect information can also lower your credit score. Outdated contact details make it difficult for lenders to reach you, which can lead to missed payments. Inaccurate entries on your credit report, including debts that don’t belong to you, can adversely affect your credit rating.

With all these factors mentioned, you should know how to check a credit score and request a report to ensure that all the information in your file is correct. Additionally, you can take the necessary steps to correct any inaccuracies that may improve your credit score.

And to improve your credit score, establish good credit habits such as meeting repayments on time and communicating with your lender if you face difficulties. 

If you’re wondering how to improve your credit score, it will depend on your current situation if taking out additional loans can positively impact your current ranking.

As we mentioned, if you keep on applying for multiple credits, like low credit score loans, within a short amount of time, you’ll likely appear to be in credit stress for credit reporting agencies.

However, your low credit score may be due to your lack of credit history. Reporting agencies may have limited information about your creditworthiness if you have not previously taken out loans or established substantial credit accounts.

If this is the case, applying for a small loan or a credit card could be one way to build your financial profile. By diligently adhering to the repayment terms, you can establish a positive credit history and improve your score over time.

If you have multiple debts, a debt consolidation loan may be useful in minimising your monthly interest and repayments. Provided the single monthly repayment on your debt consolidation loan is lower than that of your current repayments, and you don’t end up paying out more over time due to a longer loan term, it’s likely the most suitable choice to help you become debt-free sooner. At the very least, it will put you in a better position to demonstrate consistent, positive credit behaviours.

Remember, low credit score loans and other types of credit will affect your score, so it’s a good idea to talk with a financial advisor or counsellor beforehand if you want to build your credit rating.

There are credit providers that specialise in offering loans for low credit score holders. Still, approval for bad credit loans is not guaranteed, as lenders need to ensure that you have the capacity to repay the borrowed funds. In addition, if you’re interested in low credit score loans, you should note that they typically have higher interest rates. 

It may be tempting to apply for low credit score loans, but it’s worth considering all your alternatives. Ultimately, knowing how to work on your credit score and acting on it may be the most effective long-term strategy you can take. A good credit score reduces your perceived risk as a borrower, improving your chances of accessing more favourable loan options in the future.

What’s even better is that there are convenient ways to view your credit score and keep track of your progress. With the MONEYME mobile app, you can check your credit score for free within minutes. 

Our Credit Score tool grants you access to the very information that lenders and banks use to assess your creditworthiness. Even better, you’ll get personalised insights that can help you improve your credit score. You’ll also receive useful tips to further turn your low credit score into a more favourable one, and you’ll be updated with special offers from MONEYME.