Is 550 a Bad Credit Score? Can I Buy A House? Can I Raise My Score?
The FICO determines credit scores between 300 to 800, with higher scores reflecting “good credit” and vice-versa. So, is 550 a bad credit score? In short: yes it is.
Based on FICO reporting, a credit score of 550 is considered “very poor.” And because it sits so low on the credit score scale, a 550 credit score can affect your financial future.
What Are the Consequences of Having a 550 Credit Score?
The consequences of having bad credit can touch almost every part of your life. From buying a home to applying for student loans, a 550 credit score can hamper your financial growth. Below are a some of the most significant headaches having a 550 credit score can give you:
You’ll Pay High-Interest Rates on Car Loans
Because a 550 credit score is very poor, this almost always means you’ll pay higher interest rates on auto loans. Car buyers with bad credit can pay interest rates of 18 percent or higher. By building your credit back up, you can avoid paying thousands of dollars in auto loan interest.
Renting Can Become a Nightmare
Most landlords will run a credit score and background checks on all possible renters. A 550 credit score is usually the result of past financial mistakes so that a landlord will take note of that.
Also, if it comes down to you and another applicant, the one with the better credit score will have the advantage.
Your Insurance Premiums Skyrocket
Insurance companies take a look at credit scores when determining premium costs. Whether it’s auto insurance or medical policy, your 550 credit score can make your premiums go sky high. Improving your credit score simultaneously, help you save on future insurance premiums.
You May or May Not Get Approved for a Private Student Loan
A credit score in the mid-500s can hamper your odds of getting approved for a private student loan. And even if you do get accepted, you’ll be offered a Student Loan at an incredibly high-interest rate.
You Could Have to Put Down Money For a Security Deposits on Utilities
Customers who have very poor credit scores are considered a “financial liability.” To make up for your risk, you’ll have to put down a “security deposit.” Security deposits don’t go toward future payments and are usually only returned when the account closes.
My Credit Score is 550, Can I Buy a House?
With a credit score of 550, buying a house, or any real estate property will be challenging. Mortgage companies tend to not approve loans to lenders with credit scores less than 580.
If you are somehow approved, you’ll have to put down more than the industry standard 20 percent on the home, as well.
In some cases, a joint applicant or cosigner can improve your odds of getting approved. But, if you become delinquent on your mortgage and can’t repay, repayment falls onto the cosigner.
My Credit Score is 550, How Do I Raise It?
Well, here’s the good thing about credit scores: They can always be changed. Here are a few tips on how you can go about raising your 550 credit score:
Keep Tabs on Your Credit Score and Report
Building your credit score means you’ll need to check it on a regular basis. Consider reviewing your credit report at the end of each month. This will let you know exactly how your purchases and payments are affecting your score.
Also, it’s a good idea to check your credit report for errors. Make sure it’s clear of any past debts that have been paid for in full. It’s a good idea to also make sure there aren’t misplaced debts on your report.
Pay off credit card balances, But Don’t Close Them
Maxing-out your available credit limit can take a hit on your credit score. However, closing credit cards can reduce your total available credit limit and harm your credit utilization rate, as well. To improve your credit score, it’s best to simply pay down your current balances and leave those cards open.
Clean Up Your Credit Report of Derogatory Marks
Here’s a sobering fact: Some “derogatory marks” on your credit score can stay on for up to seven years. But, if you’ve rectified the debt, you have the option of calling the debt collector or institution and have it removed. Give your credit report a good look over, and make sure all past paid debts are off it.
A 550 Credit Score Isn’t the End of the World
Hope we did more than answer your questions (is 550 a bad credit score)Sure, having a bad credit score is less than ideal, but it’s not the end of the world. By acknowledging the fact that your credit is bad, you can go about appropriate steps to improve it.
Be diligent about rebuilding your credit and, your score will be shooting through the roof. And that sky-high credit score will make your financial life better, all around.