A credit score generally falls in the range of 300 to 850, and a 550 credit score is below average.
Lenders will not lend to those possessing a 550 credit score, because they have unfavorable credit. Having a below-average credit score is not the worst position to be in, but you are limited from using your loans or credits and credit card companies generally require some kind of security deposit on any service contract.
Factors Affecting Your 550 Credit Score
When your financial status changes, so do your score. You must know what factors cause these changes and you need to improve them.
Here are some following factors that affect your credit score. You can build your credit score if you know why these take a hit on your score.
Payment history is one of the most important factors in credit reports. Even in case of one missed or late payment, this will have a negative impact on your credit score.
This will show a bad impression to lenders and you may get denied when you apply for a loan or for new credit. Your credit score involves 35% of your payment history.
Credit Utilization Ratio
You should maintain a low credit utilization ratio, preferably at less than 30%. The credit utilization ratio is calculated by dividing the revolving credit by the available credit.
Length of credit history
Your credit history length makes an impact on your credit score. Longer credit history will show a good result in your credit score. 15% of your credit score is calculated by your credit history.
It will take some time to improve your score, so you must be patient while you are following good credit habits.
When you do not have a proper credit mix, then your 550 credit score will suffer. The credit scoring system uses various credit accounts like revolving credit and installment credit. Revolving credit includes credit card accounts with a particular credit limit and installment credit includes mortgage loans and car loans.
It is good when you use multiple accounts because the credit mix involves 10% of your credit score.
Applying for New Credit
When you apply for a new loan or credit card continuously, your credit score will take a hit. Credit card applications will raise hard inquiries and it stays on your credit report.
When hard inquiries appear on your credit report, your credit score will go down and it will take some time to improve your credit score. The new credit will make up 10% of your credit score.
Improve your 550 Credit Score
It is disheartening to have a 550 Credit score, but it is good to know that you can improve your score.
Check your credit report for errors, by getting it from any of the credit bureaus (Experian, Equifax, and TransUnion). You can follow these steps to improve your 550 credit score to the perfect score.
- Make Payments on Time.
- Have a low credit utilization ratio.
- Do not apply for a new credit card.
- Do not close your accounts.
- Consolidate your debts.
- Credit Mix.
- Take a credit-builder loan.
- Apply for a secured credit card.
It is difficult to follow these steps, but once you begin working on them, you will improve your credit score.
Can you get loans if I have a 550 Credit Score?
You need good or excellent credit to get a personal loan, and when you have a 550 credit score, it is difficult to get qualified.
Despite this, there are some lenders who provide personal loans for a poor credit score.
When you look for a personal loan, you should search for lenders who satisfy your requirements and give you loans. Your requirements should include the interest rates, repayment terms, and lender fees.
How to get a personal loan with a 550 credit score?
When you approach a lender with a 550 credit score, then make sure you look at these places too.
- Check for any online lenders.
- Contact the Credit Unions and Community Banks.
- High-interest installment loans and Line of Credit.
If you are finding it difficult to get a loan, there are a few alternatives:
- Credit cards.
- Advance in paychecks.
- Debt management plans.
- Financial assistance programs.
What type of credit card is available for a 550 Credit score?
For a 550 credit score, you are provided with a secured credit card.
Secured credit cards are good to use when your credit score is 550. For secured credit cards, the credit limit is the security deposit. This reduces the pressure on the consumer who has a 550 credit score.
If you miss payments frequently, they use your deposit amount to cover their loss.
The advantage is that your credit card issuer will report the credit details to the credit bureaus and help you improve your credit score. You must make sure that your financial details are reported to the credit bureaus.
When you have a 550 credit score, it is a good starting point for your credit score. You must follow good credit habits to reach the perfect credit score.
Having bad credit is difficult, and good credit is difficult to build, so you must contact a legitimate credit repair company for help. They provide a free consultation regarding your credit report and score.
Frequently Asked Questions
- How long does it take to fix a 550 credit score?
If you use your credit responsibly, it takes 12-18 months to fix your 550 credit score. When your score is low, any good financial changes will show a huge impact on your credit report.
- Can I finance a house with a 550 credit score?
Yes. but you must take an FHA loan. When you apply for an FHA loan it requires a 10% down payment of the house price.
- What does it mean if you have a 550 credit score?
When you do not have a proper credit history, then you will have a 550 credit score. It is difficult to get approved for unsecured credit cards.