Can You Get a Personal Loan With a Credit Score of 550?

Can You Get a Personal Loan With a Credit Score of 550? article image.

You may be able to get a personal loan with a 550 credit score, but you might not be approved for a large loan or one with a low annual percentage rate (APR). Depending on the situation, you may want to look for alternative forms of financing or work on improving your credit and before you apply.

What Kind of Credit Score Is 550?

A 550 FICO® Score puts you in the very poor credit score range, which goes from 300 to 579. Although a 550 is on the higher end of the range, it's still considered a low credit score.

There are several reasons why you may have a low score, such as delinquent accounts, previously missed payments or a record of bankruptcy in your credit file. Over time, the impact of these negative marks will diminish, but most negative items can stay on your credit reports for up to seven years and affect your credit scores the entire time.

You can still qualify for some types of financing with a 550 credit score. However, personal loans are often unsecured loans, which means the lender is giving you money based solely on the promise that you'll repay the loan. Because borrowers with lower credit scores are statistically more likely to miss payments, lenders often charge higher rates to these borrowers to limit their financial risk.

How to Get a Personal Loan With a 550 Credit Score

Many personal loan lenders require a credit score that's at least in the 600s, which means your options will be limited with a 550 credit score. However, there are lenders that specialize in working with borrowers who have poor credit. Here are some places you can look:

  • Online lenders: A few online lenders have a low credit score requirement. You may be able to get prequalified with a simple application that doesn't impact your credit score.
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  • Credit unions: Credit unions are not-for-profit financial institutions that serve their members—people who have accounts at the credit union. Credit unions may be more flexible than traditional banks when it comes to working with poor-credit borrowers. You can often qualify to become a credit union member based on where you live, work or by making a small donation to certain nonprofits.
  • Community banks: Similar to working with credit unions, if you've been a regular customer at a community bank, you could ask a banker about their loan options. You may find that the banker will work with you based on your established banking relationship.

There are also some types of bad credit loans that are best to avoid, or only use as a last resort:

  • Payday loans: A payday loan often doesn't require a credit check, but the loan's sky-high fees and short repayment term make it an expensive option. Some borrowers find themselves paying a fee to extend their repayment period, making the overall cost even higher.
  • High-interest installment loans and lines of credit: Some lenders offer installment loans and lines of credit you may qualify for, but charge high fees and interest rates that make them difficult and expensive to repay.
  • Title loans: If you own a vehicle, you can use it as collateral to take out a loan. Title loans are risky, however, because you risk losing your vehicle if you can't make a payment on time.

Alternatives to Personal Loans When You Have Bad Credit

If you're having trouble getting approved for a personal loan or find you're only getting approved for loans with unreasonable rates and terms, consider a few alternative financing options:

  • Credit cards: While credit cards often have high interest rates, sometimes the APR on a credit card will be lower than what you'll receive with a high-rate personal loan. You can apply for credit cards with bad credit to find out the APR the credit card company will offer you. Also, see if any of your credit cards have temporary 0% APR offers, which could make them a low-cost option if you pay off the balance before the interest rate offer ends.
  • A paycheck advance: Some companies let you take out a payroll loan, or advance on your next paycheck (without the high rates that payday loan lenders charge). There are also early payday apps that could give you low-cost advances or small loans.
  • Friends and family: If you're in a jam and need help with a one-time bill, getting a small loan from friends or family members may be an option.
  • Debt management plans: A debt management plan might help if you're struggling with lots of credit card debt. A credit counseling agency will work to get fee waivers and lower monthly payments on your credit cards, helping free up extra cash for your monthly budget. You will make one monthly payment to the credit counselor, who will distribute the money to the card issuers. However, you may need to close your credit card accounts.
  • Financial assistance programs: Look to see if you qualify for nonprofit or government assistance programs. These might not offer you a loan or direct cash assistance, but could help decrease your expenses.

Additional options depend on why you need a personal loan. For example, if you need money for rent, you might want to ask your landlord for an extension or see if they'll lower your rent in exchange for working on property repairs or maintenance. Or, if you're struggling to afford a medical bill, you may be able to negotiate a low- or no-interest payment plan with the health care provider.

How to Improve a 550 Credit Score

Improving a 550 credit score can require patience and action. Patience, because you may need to wait for the impact of negative items to diminish. And action, because there's a lot you can do in the interim to help improve your credit:

  • Pay all your bills on time. Making payments on time is possibly the most important thing you can do for your credit. Once a bill falls 30 days past due, the creditor can report your late payment to the credit bureaus, and the late payment mark could stay in your credit history for up to seven years. It's also important to make on-time payments for bills that aren't usually reported to the credit bureaus because a defaulted account may be sent to collections; the collection account could then wind up on your credit report and affect your scores.
  • Lower revolving account balances. If you have credit card and revolving credit line debt, paying down your balances could lower your credit utilization and help improve your credit scores. This can be a quick way to improve your credit scores if you currently have high credit utilization.
  • Use Experian Boost®ø. A free service, Experian Boost lets you link your bank accounts and add on-time phone, utility and streaming service payments to your Experian credit report. These accounts aren't typically reported to the credit bureaus, and their presence could give a lift to scores based on your Experian credit report.
  • Open new accounts only as needed. If you don't have many credit accounts open, you may want to take out a secured credit card or credit-builder loan to help rebuild your credit. Making on-time payments on your new account can add positive information to your credit reports, which may help your scores. Do so only if you're sure you can make all payments as agreed, however. And keep in mind that opening several accounts in a short period can affect your scores negatively.

Improving your credit isn't only important for getting better loan terms. A good credit score can also save you money on insurance in many states, make renting a home easier, and keep you from having to pay security deposits to open new utility accounts.

Monitor Your Progress

As you work to improve your credit, you can monitor your credit reports and scores for free with credit monitoring from Experian. You can also log in to your Experian account to use the Experian CreditMatchTM tool and quickly see if you're prequalified for personal loan offers from Experian's partners.