If you have a low credit score, figuring out how to get a loan can be a challenge. But low credit does not mean that you need liquidity any less. There are countless reasons that people take out loans throughout their lives: purchasing real estate, starting a business, paying for tuition, investing in new opportunities, tackling unexpected bills, buying a car, you name it. Just because you have a poor credit score should not make you ineligible for lending for these important purchases.
Unfortunately, your credit score has a big impact on the loans (and interest rates) that you are eligible for – especially when you go through traditional pathways like bank loans in order to borrow money. That is why alternative pathways like collateral lending can be attractive options, particularly for those with low credit.
Today, we are going to take a closer look at the factors that contribute to having a low credit score. We will examine how those with less-than-perfect credit are often boxed out of the lending market, gatekeeping them from lucrative opportunities that can help them improve their overall financial picture. Finally, we will showcase some of the key secrets to getting high-value, low-interest loans even if your credit score is fair or poor.
What Factors Contribute to My Credit Score?
Your credit score is calculated based on a few different factors. The main credit score providers, FICO and VantageScore, do not publicize their proprietary credit score calculation formulas. However, there are five main categories that are weighted as a percentage of the total score.
- Payment history (35% of total score)
- Amount owed (30% of total score)
- Length of credit history (15% of total score)
- Credit mix (10% of total score)
- New credit (10% of total score)
Payment History
Amounting to 35% of your total credit score, your payment history is the most important factor in determining your credit score. This variable looks at whether or not you consistently pay off your credit cards on time as well as any bankruptcies or delinquencies that you have in your past. Those with relatively young credit can be dinged here, as you may not have a robust history of positive, on-time payments for the assessor to draw from.
Amount Owed
The amount owed variable compares how much credit you have spent versus the amount you currently have available. For instance, you might have a credit card with a limit of $10,000 on which you have spent $8,000. In that case, your amount owed percentage would be 80%. The overall amount owed category looks at all of your credit sources combined, not just one credit card. Credit score calculators typically like to see an amount owed ratio of 30% or lower.
Length of Credit History
How long have you had open lines of credit? Your length of credit history helps lenders assess your reliability and trustworthiness to pay back a loan. Even if you have two years of credit with 100% on-time payments, that is more of a risk than someone with 20 years of credit and 100% on-time payments. The longer you have a credit score, the better this factor will get.
Credit Mix
One of the smaller factors in determining your credit score, credit mix makes up just 10% of the total. This refers to the combination of different types of credit that you have. Ideally, you will want to have various types of credit cards, loans, and/or lines of credit open. For instance, you might have a few credit cards, an auto loan, a mortgage payment, and tuition debt. Managing different types of credit at once shows lenders that you can handle paying off debt on time.
New Credit
Your overall length of credit history makes up 15% of your total score, but new credit contributes an additional 10%. When you apply for a new credit card, lenders interpret that as a sign of financial pressure. That is why your credit score often declines slightly when you first open a new credit card. You do not want to have too much new credit, because this could indicate that you are in an unwieldy position or are getting in over your head.
Why Do I Have a Low Credit Score?
There are many reasons why people have low credit scores – and why many people struggle to raise their scores over time. For reference, bad credit is considered a FICO score below 580 or a VantageScore below 601. Your credit score is calculated based on the factors that we discussed above, but in simpler terms, low credit can occur from the following situations:
- Missing credit card payments or paying them late
- Applying for too many new credit cards
- Using too high a percentage of your available credit (aim for around 30%)
- You closed an old credit card, lowering your length of credit history
- You declared bankruptcy
- Pulling too many hard credit checks
- Choosing a credit card with a high interest rate or perks that do not benefit you
- Borrowing more than you can afford to pay off
- Maxing out one of more credit cards
- Having your identity stolen
- Facing foreclosure on your home or another real estate property
Why Does Your Credit Score Matter?
So you have bad credit, who cares? Your credit score might seem like just a number, but it is actually an important factor in getting approved for loans, new credit cards, and other money borrowing options (getting a mortgage, a car loan, and more). When you have a low credit score, you may be denied credit cards or loans. Alternatively, you may be offered loans with extremely high interest rates, making it even more difficult to pay off debt in the long run.
For example, the average interest rate for a personal loan through a bank is currently about 12.44%. If you have a poor credit score, however, that average goes up to a whopping 21.65%. Those are not just numbers – they are dollars that you lose by paying more to borrow money.
But do not despair! There are options for borrowing money cheaply even if you do have a low credit score. Our favorite? Collateral loans.
How to Get a Loan With a Low Credit Score
With a low credit score, traditional personal loans can often fall short of your needs. You will likely be approved only for high interest rates and low loan amounts, which may not approach the money you actually require for your next big move. Luckily, there is a better solution.
Collateral lending is the process of leveraging one of your high-end assets in order to secure a loan. You do not need to sell one of your valuables. You can simply offer it up to a specialized lending company to validate that you can and will pay back the money you borrow. This reduces the risk for the lender, translating to major benefits for the borrower (that is you)!
Here at AMETA Finance Group, we specialize in collateral lending for high-end watches and prestigious jewelry. If you own an heirloom jewelry collection or an elite Swiss watch, you are in luck: You no longer need to rely on your credit score to prove your trustworthiness for a loan. Instead, you can put your valuables to work for you!
No matter what your credit score is, we can offer impressive 4% interest rates that blow bank loans’ standards out of the water. Plus, you can even combine multiple pieces in your collateral loan to borrow up to $5 million. Frankly, that is way more than you will ever get approved for with a personal loan through traditional methods. We are dedicated to helping our valued customers unlock financial freedom and open new doors with collateral lending that is safe, secure, and trusted throughout Manhattan and beyond. The only question now is… what are you waiting for? Get started today by submitting a preliminary inquiry.
Build Financial Wellness With AMETA Finance Group
When you take out a high-end watch or jewelry loan with our team at AMETA Finance Group, you can wave goodbye to getting denied for loans because of your credit score. Say farewell to embarrassing credit checks, high interest rates, and repayment terms so paralyzing that you wonder why you ever borrowed money in the first place. That is all in the past now.
At AMETA, we lend against a variety of elite watch brands. Think classic favorites such as Rolex, Audemars Piguet, Richard Mille, Patek Philippe, F.P. Journe, and Lange & Söhne. We also lend against high-end jewelry crafted from precious metals and prestigious gemstones.
Whether you are looking to leverage a diamond ring or borrow against a vintage Rolex, AMETA Finance Group is the place to turn for reliable and reputable collateral loans. Submit this short form to get a preliminary estimate of your collection’s value, and discover endless possibilities.
