Some articles may have made it seem hopeless for you to consolidate debt because they said that those with bad credit scores could not qualify. Those articles don’t accurately explain credit scores or the many methods of debt consolidation.
What is bad credit?
A lot of articles online consider scores in the 600s as bad and that isn’t accurate. In the U.S., three major credit bureaus track credit histories – TransUnion, Experian, and Equifax. Each of these bureaus maintains its own scale of creditworthiness. Up-and-coming bureaus also maintain their own credit score range, and Fair Isaac Corporation (FICO) uses its own scale that ranges from 280 to 990. Let’s consider those bureau ranges:
• TransUnion – 300 to 850
• Experian – 0 to 1,000
• Equifax – 280 to 850
• Vantage – 300 to 850/900.
LifeGap nicely summarizes an accurate set of credit score ranges in seven categories, ranging from poor credit (0 to 486) to excellent credit (767 to 999). The average credit score ranges from 583 to 613. If you have “bad” credit, your score falls into the poor credit or unfavorable credit (487 to 526) ranges.
A bad credit score does not mean that you cannot consolidate your loans and credit cards! It means that you will not qualify for the lowest interest rates and annual percentage rates (APRs), which lenders reserve for those with super prime and prime credit scores.
Methods of Loan Consolidation
You can use one of three debt consolidation methods to turn many credit cards and loans into a single debt that costs you less to repay. Here are the options:
• Debt consolidation loan
• Balance transfer credit card
• Enroll in debt settlement.
Anyone, no matter what their credit score, can enroll in a debt settlement program and pay off their debts at a reduced amount and a lower interest rate. Only debt consolidation loans and balance transfer credit cards use your credit score to determine if you qualify.
Debt Consolidation Loans
Debt consolidation loans like those offered by Symple Lending rely on your credit score to determine your interest rate and APR. Those with low credit scores in the 500s may not qualify for a loan or may only qualify for a consolidation loan with a high interest rate. For a consolidation loan to help you, it needs to offer a lower interest rate and APR than the credit cards and loans you have. You obtain the loan and pay off every credit card you have. You then have between two and seven years to pay off the consolidation loan.
Balance Transfer Credit Cards
Balance transfer cards let you transfer existing credit card balances to the card. These cards incentivize transfers of debt by offering a loan at a very low or no interest rate during an introductory period. For the first six to 18 months that you have the credit card, you save money by significantly reducing the interest you pay. By paying the full amount you already did before you consolidated, you quickly eradicate your debt.
Get Out of Debt Today
Explore your options by first finding out your credit score. Check each credit bureau to learn the true picture of your credit history and score. From there, proceed by checking your options with personal loan experts Symple Lending and your favorite credit card company.