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How an Unsecured Personal Loan With Bad Credit Can Affect Your FICO Score?

May 13, 2011 by · Leave a Comment 

There is no doubt that there exists an important relationship between risk and your ability to get credit cards as well as loans at better rates than most people, in addition to the proverbial cash back and rewards credit card options offered. The differentiator is your FICO score, and despite its failure to assess risk for subprime applicants in recent times, it continues to be the most widely used score by banks and lenders to assess the financial risk of an applicant.

Yet despite having bad credit you can still avail of an unsecured loan from lenders but experts normally suggest that the only way you are going to get your FICO ratings up much faster is by taking secured loans instead.

However, if you do take a personal loan with bad credit, you are giving lenders the opportunity to charge a much higher rate of interest, and while you will still be improving your credit score, you’ll also pay a lot of money in the bargain.

On the other hand, if you also obtain a few bad credit credit cards, one late payment for any of these credit products (whether a loan or a payment for your credit card) can mean that you credit score will drop.

To say the least, your FICO score and the amount of credit that you maintain have an effect on each other, and so it is important that you watch your spending during a time when you have poor credit. Not only do people who have a high credit score get the best personal, auto and home loan rates but it will also affect their ability to obtain a better paying job as well.

No matter how you look at it, how you manage your credit counts for a lot, and in turn, will determine whether you get a high or low FICO score.

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