Your credit score affects how much you’ll pay for loans and credit cards. It also plays a part in your future housing decisions and job prospects.
Your credit score is based on five different factors. The largest portion is payment history, followed by accounts owed and average age of credit. Then there’s your mix of credit, which contributes up to 10%.
Overview of a 538 Credit Score
When it comes to loans and credit cards, a 538 credit score is considered very poor. This score is 162 points away from a “good” credit score (630-669) and 102 points away from a “fair” credit score (550-579).
It’s important to understand that not every lender will consider someone with this score for any loan, regardless of the credit product they are looking for. This is because lenders use credit scores to help assess your risk level when making a lending decision.
The best way to improve your score is by paying your bills on time and keeping your credit utilization rates low. This is especially important if you have multiple credit card accounts, as high credit utilization can lower your overall score.
Another way to improve your score is by having negative marks removed from your credit report. These marks can include late payments, accounts that are in collections, and bankruptcy. These marks typically fall off your credit report after two years, but they can stay on for up to seven years if they are derogatory or result in a negative impact on your ability to borrow.
Credit Card Options with a 538 Credit Score
When your credit score dips into the low 538 range, finding new cards can be tough. But there are several options to consider.
Your credit mix — the amount of different types of debt you have — is also an important factor. The more diverse your debt mix, the better your credit score will be.
You may be able to boost your credit score by adding another type of credit account to your existing portfolio, such as an installment loan or an auto lease. However, this can take time.
You should also avoid paying any credit card fees that are above a flat fee minimum of $10. These can eat into your credit limit and make it harder for you to pay off your balance.
Auto Loans with a 538 Credit Score
If you have a 538 credit score, it will be difficult to find a lender who is willing to extend an auto loan to you. This is because borrowers with a poor credit rating are considered high-risk by lenders.
However, if you are diligent and take the necessary steps to repair your credit, you may be able to qualify for a car loan even with a low score. In addition, you can refinance your loan later to receive lower interest rates.
Your credit score is the largest factor in determining your car loan rate. But your down payment and debt-to-income ratio also play a role.
Applicants with a lower credit score can get easier auto loan terms by using a co-signer. Ask a family member or a friend with a good credit score to co-sign your loan.
Personal Loan Options with a 538 Credit Score
If you have good credit, a personal loan can be an excellent way to consolidate debt. These loans typically have lower interest rates than credit cards, and you can save a lot of money over time.
Those with bad credit can also benefit from a personal loan, as well. A personal loan can help you pay off your debt faster, which will improve your credit score.
When applying for a personal loan, you’ll want to shop around to find the best terms and interest rates. Some lenders offer a prequalification process that lets you see what they would offer you without affecting your credit.
Once you’ve chosen the best lender, you’ll need to fill out a full application. Depending on the lender, this can take a few hours to a few days to complete.
Mortgages with a 538 Credit Score
Your credit score plays a huge role in your ability to get a loan. It’s one of the most important indicators of your financial stability, and it can influence everything from whether or not you qualify for a mortgage to the interest rates you pay on your credit cards.
While your credit score may not be the most important factor when deciding whether or not you want to take out a loan, it’s still worth considering. If you’ve been struggling with your credit for some time, boosting it up can make the difference between getting approved and being rejected for a loan.
It’s also important to remember that things like hard inquiries and derogatory marks on your credit reports are generally only going to affect your scores for a few years before they fall off. Bankruptcies can be a more significant impact on your credit scores, but they should still fall off within 7-10 years.