Bad credit? These lenders might be able to help
Just because your FICO score isn’t as good as you’d like, doesn’t mean you’re stuck with a bottom-tier mortgage lender.
In fact, some of the very best lenders out there are willing to help borrowers with credit scores near or below 600.
Of course, not everyone will qualify. And your rate will be higher than a “prime” mortgage borrower.
But you can still shop around for the best interest rate, fees, and customer service, just like any other home buyer.
Here’s where we recommend starting your search.
|Company||Minimum Credit Score||Stands Out For|
|New American Funding||580||Low credit minimum, top-rated service|
|Guaranteed Rate||580||Lowest rates on average|
|Freedom Mortgage||540||Low credit minimum|
|Caliber||580||Highly rated customer service|
|Navy Federal Credit Union*||580 but exceptions possible||Flexible credit requirements for veterans|
*Navy Federal Credit Union only serves veterans, active-duty service members, and select military-affiliated personnel
Editor’s note: The Mortgage Reports may be compensated by some of these lenders if you choose to work with them. However, that does not affect our reviews. See our full editorial disclosures here.
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The 6 best bad credit mortgage lenders
1. New American Funding
We liked New American funding when we wrote its full lender review. And we still do. But what gave it our #1 slot?
To start with, New American Funding (NAF) examines each mortgage application on its own merits rather than taking a tick-box approach.
That means it can sometimes be more sympathetic to those who’ve had financial problems in the past, including credit issues.
Additionally, NAF offers:
- Competitive mortgage rates, on average
- Strong customer reviews and very few complaints
- A wide range of types of mortgages, including FHA loans with a minimum credit score requirement of 580.
- Flexible customer service: in-branch, online, by phone, or any combination
- Fast turnaround. NAF says, “We guarantee that your loan will close in 14 business days. Period,” according to its website (this includes purchase mortgages only; not refinances)
- A constructive approach to down payment assistance programs
- An A+ rating with the Better Business Bureau (BBB)
- A bilingual call center with English and Spanish
The only big drawback to New American Funding is that it’s not licensed to lend in New York state or Hawaii.
But if you live in any of the other 48 states, this lender is likely worth a look for a bad credit home loan.
2. Guaranteed Rate
Guaranteed Rate may not be quite as skewed toward borrowers with bad credit as New American Funding. But it still approves applications from people with scores as low as 580.
And it’s strong in other respects:
- Highly competitive mortgage rates and origination costs
- Excellent reputation for customer service and few complaints
- A comprehensive range of mortgage products
- Licensed to lend in all 50 states
- A+ BBB rating
- 300-strong branch network if you prefer to work face to face
- Highly praised technologies deliver a good online experience
Guaranteed Rate had the second-lowest average mortgage rate among our top lenders in 2019. (The lowest of all was Navy Federal Credit Union, but it’s only available to veteran and military borrowers.)
Of course, if your credit is on the low end, your rates will likely be above average.
But when you start with a lender that’s known to offer low rates, you may have a better chance at getting a good deal.
3. Freedom Mortgage
Although Freedom Mortgage is an expert at VA loans (those for veterans and service members), it offers a good range of other mortgage products.
Freedom Mortgage may even approve FHA loans for some borrowers with scores as low as 540. Here’s what else you need to know:
- Rates are generally competitive, though average loan fees are a bit higher than some other lenders on this list
- Takes into account “non-traditional credit histories.” So if you have a sparse credit history, it may look at on-time payments for things like rent, utilities and so on, which don’t typically appear on credit reports
- Praised for customer service on many online forums
- Traditional, personalized approach, meaning you can expect more face-to-face or phone encounters. There’s not much of an online experience
- Licensed in all states and has branches in 26
It’s definitely worth getting a personal quote from Freedom, especially if you’re a veteran or service member in the market for a VA loan.
Like many on this list, loanDepot is a fairly recent, tech-first mortgage lender.
loanDepot has only been around since 2010, but during that time it’s grown to the fourth biggest mortgage originator in the US, largely on the back of its innovative lending technologies.
Here’s the lowdown:
- Minimum credit score of 580
- The 5th highest score in J.D. Power’s 2020 mortgage origination satisfaction study and an A+ BBB rating
- Typically has very fast loan processing with many parts of the lending process automated
- Not the lowest rates or fees on our list, but generally competitive
- Higher rate of CFPB complaints than most on our list
- Licensed in all states with branches in 43 states
- A wide portfolio of loan types
If you’re a big fan of technology and prefer an online application process, loanDepot may be a good option for you.
5. Caliber Home Loans
Caliber delivers a much more personalized and engaging sort of customer service than those who encourage more online interactions.
It has some slick technologies in its back office and may offer faster-than-average closing times. But you’ll be dealing with a person rather than a screen.
Here’s what to expect from Caliber Home Loans:
- Competitive rates and costs
- Minimum credit score of 580
- Few customer complaints to the CFPB
- Good customer reviews online
- An A rating from the BBB
- Licensed in all 50 states
- Happy to work with down payment assistance programs
- Great range of types of mortgages
If you prefer to work with humans rather than computers, Caliber is a shoo-in for your shortlist.
6. Navy Federal Credit Union
Navy Federal Credit Union is a special case. To start with, it’s a credit union, and only members can get loans from it.
Navy Federal membership is restricted to veterans, service members, and others with close affiliations with the military. For that reason, it’s a specialist in VA loans.
For those who are eligible for membership, Navy Federal Credit Union offers:
- The lowest average mortgage rates and fees on our list (though part of that can be chalked up to its focus on VA loans, which have lower interest rates)
- No minimum credit score. Navy Federal says, “A member’s approval isn’t determined by just one number — but by several factors,” meaning it will likely consider lower scores with compensating factors and non-traditional credit histories
- Highest J.D. Power customer satisfaction score on our list
- But also the highest proportion of CFPB complaints
- A+ BBB rating
- No FHA or USDA loans. If you’re not eligible for a VA loan, you may need to look elsewhere
- Good online services, including an app that lets you track your loan application’s status
If you’re eligible for membership and a VA loan, you’ll want Navy Federal on your shortlist.
What’s considered ‘bad credit’ for a mortgage?
We’re talking about bad credit mortgage lenders here. But what exactly is “bad credit”?
Many lenders follow the scoring model from FICO, the company that created the most widely used scoring technologies. It reckons that anything below 580 counts as “poor.”
If your score is in the 580-669 range, it’s actually considered “fair.” If it’s between 670 and 739, it’s “good” — and anything above that is “exceptional.”
- Below 580 — Bad credit
- 580-669 — Fair credit
- 670-739 — Good credit
- Above 740 — Excellent credit
However, it’s important to understand that the definition of “bad credit” can vary, because lenders are free to define their own score ranges how they like.
That means what one lender considers a bad credit score could be perfectly acceptable to another lender.
Just because your score is in the poor range, that doesn’t mean you can’t get approved for a mortgage. But you’ll likely need a sizable down payment and a good story that explains your low score and shows that its cause is in your past.
You’re also likely to have to seek out a sympathetic lender. And that’s where our list of the best bad credit mortgage lenders can come in handy.
How a low credit score affects your mortgage
Even if you’re approved for a loan, a low score means you’re going to pay a higher mortgage rate than someone with a better score. That part is unavoidable.
How much higher? FICO has a calculator that could give you an idea. It actually doesn’t go below 620, but it can give you a feel for the difference a credit score makes.
Here’s how the numbers looked for a $250,000 mortgage (though keep in mind that these will vary as mortgage rates change daily):
|Credit score range||Estimated APR*||Monthly payment||Total interest paid over 30 years|
*Interest rates and payments were sampled in November 2020 and may not reflect current market rates
The monthly differences may look small. But you can see that even paying just $30 more per month, your total interest costs go up by $10,000.
As credit scores go lower, the difference in interest rates and payments grows.
Bad credit mortgage loan options
Of course, you’re not just seeking out the best lenders for people with bad credit. You need a type of mortgage that can accommodate your needs. Here are the main ones:
- FHA loans — FHA loans, backed by the Federal Housing Administration, are the most popular option for borrowers with bad credit. Most borrowers need a minimum credit score of 580 and a 3.5% down payment to qualify. But if you can make a 10% down payment, you may be approved for an FHA mortgage with a credit score of 500-579
- VA loans — VA loans have no formal minimum credit score. But most lenders want at least 620. Some go as low as 580. And a few, such as Navy Federal Credit Union, don’t specify a score and may be sympathetic if yours is low for a good reason. We excluded Veterans United from our list because it wants a 660 credit score or better
- USDA loans — USDA loans typically require a credit score of at least 640 — so they may not be the best for low-credit borrowers. But if your score is high enough, you can use a USDA loan to purchase a home with no down payment
- Non-conforming loans — These loan programs, for which banks and lenders set their own rules, may allow credit scores below 600
Conventional mortgages — loans that conform to standards set by Fannie Mae and Freddie Mac — require a minimum score of 620 and a 3% down payment. That’s why FHA loans are more popular among those with lower credit scores.
Non-conforming loans do not meet the standards set by Fannie Mae and Freddie Mac, meaning they’re not eligible for backing from those agencies.
As a result, non-conforming loans typically have higher interest rates — but they may be available to borrowers with low credit scores.
Pick the type of loan that suits you best. If you’re eligible for a VA loan, it’s likely to be one of those.
Credit score vs. credit report
It’s easy to fixate on your credit score — the single number that represents your reliability as a borrower.
But mortgage lenders don’t just look at this number. They also do a thorough review of your credit report.
Your credit report shows your full history as a borrower.
If you have a low score because of a past event — like a foreclosure — but you’ve been a reliable borrower since then, lenders might be more forgiving.
On your credit report, lenders want to see:
- A history of on-time payments
- Reasonable credit usage (below 30% of your full credit limit is best)
- No new credit lines opened near the time you’re applying for a mortgage
Refinancing with a low credit score
How easy it is to refinance with bad credit will depend on your current loan type, and what you want your refinance to achieve.
If you currently have a government-backed loan, you may be in luck.
FHA, VA, and USDA all offer Streamline Refinance programs that do not require credit score approval. However some lenders check credit anyway, so you’ll have to search for one that doesn’t.
To use a Streamline Refinance, your new loan must be the same type as your current one — for instance, refinancing a VA loan to a VA loan, or FHA to FHA.
Conventional loan refinance
Conventional refinances, like conventional home purchase loans, require a credit score of at least 620.
If your current mortgage is a conventional loan and your credit score has fallen, you may be eligible for an FHA refinance. However, FHA loans require expensive mortgage insurance. This could eat up enough of your savings that refinancing isn’t worth it.
If you want a cash-out refinance, you’re likely to need a higher credit score.
If you currently have a conventional loan but your credit score isn’t high enough for a conventional cash-out refinance, an FHA cash-out refinance might help you access your home equity.
What to do if your credit score is too low for a home loan
The obvious way to get a mortgage with bad credit is to improve your score. You may be surprised how quickly you can make a material difference.
For tips on how to raise your credit score fast, read our Guide to improving your credit score.
There are other ways to qualify for a mortgage with bad credit, too.
- Pay down as much existing debt as you can — If you’re a more attractive borrower in other respects, lenders may be more forgiving about your score. Paying down existing debts, like credit cards and auto loans, improves your debt-to-income ratio. This has a big impact on your home loan eligibility
- Build up your savings — Making a bigger down payment can also help your case, as it reduces your risk to the mortgage lender. Borrowers with a cushion against financial problems are less likely to default. If you’re able to make a 20% down payment, a low credit score might not matter as much
- Qualify on a friend’s or relative’s good credit — If you can get someone with good or great credit to co-sign your mortgage application, your problems may be over. But it’s a huge ask because your loved one could lose a lot of money and creditworthiness if your loan goes bad
We wouldn’t recommend asking for a co-signer in any but the most exceptional circumstances, because this can be a huge risk to the person helping you out. If your loan defaults, they’re on the line for the money.
Instead, we recommend steadily building up your credit score.
Even if you can’t pay off big debts in full, making on-time payments and keeping your credit usage under 30% can go a long way toward improving your score and boosting your mortgage eligibility.
How to find the best mortgage rate with bad credit
Some lenders specialize in “top-tier” borrowers, who have excellent credit scores, bulletproof finances, and large down payments.
But other lenders, including the six on our list, are perfectly comfortable helping those with damaged credit.
So shop around to see who can offer you the best deal. And if one lender turns you down, don’t assume they all will — because that’s not how mortgage lending works.
Each lender’s business priorities can change from day to day. And different lenders offer different deals.
So putting some effort into comparison shopping could find you the loan you want at the best rate you can get.
To find the best bad credit mortgage lenders of 2020, we started by looking the 25 top lenders on a 2019 market share report from federal regulator the Consumer Financial Protection Bureau (CFPB). We also looked at a few major online lenders, as these companies are growing in popularity.
We whittled that down to our six best by filtering out lenders that required credit scores over 580; charged higher mortgage rates than the average among all top lenders; or didn’t offer FHA loans, because many home buyers with poor credit rely on those.
And we took other factors into consideration. Did a lender have a disproportionate number of customer complaints filed with the CFPB? Did it get too many negative customer reviews on online forums? Did it receive a bad rating from the Better Business Bureau? Did it do well in the J.D. Power 2020 U.S. Primary Mortgage Origination Satisfaction Study?
We didn’t automatically exclude lenders based on those last four. But you’ll find the details as you read the following reviews of each of our finalists.
Cheapest Car Insurance in Alaska 2021
With fewer than 550,000 drivers in 2018 reports, Alaska has the third-fewest drivers in the country. The natural beauty of mountains, glaciers and waterways in America’s Last Frontier are gorgeous to behold but can quickly become treacherous in the wrong conditions. It’s critical that as an Alaska resident, you have the right kind of car insurance to protect you before you get behind the wheel.
The cheapest car insurance in Alaska
The average cost of car insurance in Alaska for a minimum coverage policy is $340, while a full-coverage policy costs $1,484 per year. Just like any state, there are some companies that are more affordable than others when it comes to the cheapest car insurance in Alaska. The five cheapest car insurance companies based on the average annual premium for minimum coverage are USAA, State Farm, Geico, Progressive and Allstate.
|Car insurance company||Average annual premium for minimum coverage||Average annual premium for full coverage|
Allstate offers excellent options for coverage, including roadside coverage, sound system insurance and a personal umbrella policy. Although it scores only average for customer satisfaction, there is 24/7 claims service with a Claims Satisfaction Guarantee for extra peace of mind. There is an early signing discount when you renew early, plus other discounts for things like automatic withdrawal, early signing and full-pay.
Geico is an affordable option that is available in all 50 states. There is personal injury protection coverage, rideshare insurance and mechanical breakdown insurance, with the option for gap insurance for leased vehicles only. To help you save some extra money, there are a ton of discounts available, like military, federal employee, defensive driver and multiple vehicle. When it comes time to manage your policy, Geico helps with fantastic mobile tools to help you manage your policy.
Progressive gives you plenty of ways to save extra money on your policy with excellent discounts like continuous insurance, good student, homeowner and online quote discounts. It also rewards safe drivers with discounts through its Snapshot® program. Coverage options are generous, as well, including roadside assistance, gap insurance, custom parts and equipment coverage and a deductible savings bank.
State Farm is great for accessibility, giving you options for phone and agent support with excellent mobile tools. It holds an A++ (Superior) rating from AM Best for financial stability, so customers can feel secure in the claims process. Coverage is excellent, too, offering exclusive coverage options like emergency roadside assistance, rideshare insurance, sports car and classic car insurance. State Farm welcomes customers with a host of discounts for extra savings, like safety discounts for passive restraints and anti-theft technology, with a special Drive Safe & Save discount for safe drivers.
USAA is the best pick for cheap car insurance in Alaska for military members and their families. It has a strong car insurance program that offers its membership low rates and expansive coverage with plenty of discounts. It’s a company known for excellent customer service, consistently receiving top ratings for customer satisfaction. In addition to the option for personal injury protection (PIP), there are military-oriented discounts like savings for low mileage or when you garage your car on-base.
Affordable coverage for Alaska drivers
Alaska requires its drivers to carry a minimum amount of liability car insurance that includes the following coverage:
- $50,000 bodily injury per person
- $100,000 bodily injury per accident
- $25,000 property damage
- $50,000 uninsured/underinsured motorist bodily injury per person
- $100,000 uninsured/underinsured motorist bodily injury per accident
- $25,000 underinsured motorist property damage
According to the Insurance Information Institute, over 15% of Alaskan drivers do not have car insurance. If you were to have a collision with any one of these drivers, it could mean serious losses if you do not have the right car insurance to protect yourself. That’s why it is so important to carry at least the minimum amount of coverage required by law, if not full coverage.
How to get cheap car insurance in Alaska
There are several ways to save on your car insurance in Alaska:
- Shop around: Every insurance company prices car insurance differently, so it pays to gather quotes from multiple car insurance providers in Alaska.
- Compare providers: Compare the type of coverage offered, taking into consideration things like pricing, tools, financial strength and customer service.
- Take advantage of discounts: From safe driver discounts to discounts specifically for your school or employer, there are many ways to save money on your car insurance. Ask your insurance provider about what kind of savings could lower the price of your auto insurance in Alaska.
- Work on your credit score: The higher your credit score, the less risk you pose to insurance companies, so it pays to have good credit. There are some great options for car insurance for bad credit, but you are more likely to see additional savings when you have a good credit score to show.
- Increase your deductible: One way to lower your payments each month is to increase your total deductible. This means that you will have to pay more upfront if you experience a loss, but it still will lower your payments each month, making it more affordable for you to have insurance coverage.
Frequently asked questions
What is the best car insurance in Alaska?
For the best car insurance in Alaska, we recommend coverage from The Hartford, State Farm, Allstate and Geico. The best company for you may vary, based on things like coverage, price and credit score, but these four are the best places to start in your search for the best car insurance in Alaska.
What is the average cost of car insurance in the U.S.?
The average cost of car insurance in the U.S. is $563 per year for minimum coverage and $1,738 annually for full coverage car insurance. This is significantly more expensive than the average cost of car insurance in Alaska, which runs $340 for a minimum coverage policy and $1,484 per year for a full coverage policy.
Is car insurance required in Alaska?
Alaska requires that Alaska drivers maintain a minimum amount of liability car insurance that includes $50,000 for bodily injury per person, $100,000 for bodily injury per accident and $25,000 for property damage. Some counties in Alaska do not require car insurance, but if you intend on driving, it’s always a good idea to purchase car insurance to protect yourself.
Bankrate utilizes Quadrant Information Services to analyze rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on a 40-year-old male and female driver with a cleaning driving record, good credit and the following full coverage limits:
- $100,000 bodily injury liability per person
- $300,000 bodily injury liability per accident
- $50,000 property damage liability per accident
- $100,000 uninsured motorist bodily injury per person
- $300,000 uninsured motorist bodily injury per accident
- $500 collision deductible
- $500 comprehensive deductible
To determine minimum coverage limits, Bankrate used minimum coverages that meet each state’s requirements. Our sample drivers own a 2018 Honda Accord, commute five days a week and drive 12,000 miles annually.
These are sample rates and should be used for comparative purposes only. Your quotes may be different.
The Pitfalls of Buying Furniture With In-Store Financing
Furnishing your home can be expensive, and many shoppers find it difficult to cover the cost of doing so. To make these purchases more affordable for the average shopper, many stores offer qualified customers interest-free furniture financing. You also have other options available to you that aren’t offered by stores, like credit cards and personal loans.
How in-store furniture financing works
Many large retail stores offer bad credit furniture financing through store-branded credit cards and “buy now, pay later” furniture installment plans.
It’s fairly common for furniture retailers to offer a store-branded credit card with deferred interest financing plans, where you don’t get charged interest if you pay off the purchase in full within a set number of months. For example, you may be able to purchase furniture on your card and pay 0% APR for six months or longer, depending on the financing plan. But you could be on the hook for the interest you didn’t pay during the financing period — a phenomenon known as deferred or retroactive interest. Further, your APR will jump to 20% to 25% or higher, making repayment more expensive moving forward.
Here are a few examples of store-branded credit cards and their special financing options:
|6 furniture stores that offer financing|
|Retailer||Type of financing||Standard purchase APR||Special financing offer|
|Ashley Furniture HomeStore||Credit card||29.99% Variable||Deferred interest financing on qualifying purchases for six or more months.|
|Bob’s Discount Furniture||Credit card||28.99% Variable||Deferred interest financing on purchases of over $399 for six or 12 months.|
|IKEA||Credit card||21.99% Variable||Zero percent interest for six, 12 or 24 months on purchases of $500 or more for the IKEA Projekt card.|
|Conn’s HomePlus||Credit card||29.99% Variable||Zero percent interest for 48 months on purchases of $3,999 and more.|
|Value City Furniture||Credit card||29.99% Variable||Deferred interest financing on qualifying purchases for six or 12 months. Zero percent interest financing for 36 months with 36 equal monthly payments.|
|Wayfair||Credit card||26.99% Variable||Deferred interest financing for six, 12, 18 or 24 months on orders of $200 or more.|
Other furniture stores with financing options, including Wayfair, may offer point-of-sale loans through third-party companies like Affirm. These loans can come with a fixed APR of up to 30% with a short repayment term. This can be a good option if you prefer fixed payments, can repay the loan over the allotted term and qualify for an affordable APR.
Pros and cons of financing your furniture in-store
In-store furniture financing can be an affordable way to make your purchase — if you can pay off the debt on time. When it comes to store-branded credit cards, you’ll want to avoid deferred interest and the potentially high standard APR by paying off your debt during the special financing period. With point-of-sale loans, make sure the monthly payments and repayment term are feasible as missed payments can damage your credit.
Consider the following pros and cons of using in-store furniture financing before signing up for a new credit account or loan:
|In-store financing: Pros and cons|
You may qualify for 0% APR, if you meet requirements
In-store financing could be a good deal if you pay off the money you borrow within the zero-interest financing period.
For someone who doesn’t have enough savings to cover the furniture, it might make more sense to take advantage of a deal like this instead of tapping into an emergency fund. However, you’ll want to make sure you pay off the total debt before your term ends to avoid retroactively accrued interest.
You can get new furniture right away
With furniture financing available at checkout, you can apply for credit or a loan to pay for the items that you’ve been eyeing, even if you don’t have the cash on hand to purchase them.
The trick here is to make purchases that you can afford to pay off in a short period. Special financing offers on store-branded credit cards may only last six or 12 months, sometimes longer depending on the size of your purchase. Loans like those offered by Affirm may offer loan terms based on your purchase amount, as well.
Oftentimes, furniture retailers will work with a financial institution that issues in-store credit cards. If these credit companies report on-time payments to one or more of the three credit bureaus, you may find your credit score steadily increasing over time. Check with retailers before you apply for a card to see whether or not you can take advantage of this opportunity.
You may have to pay deferred interest
Store-branded credit cards with 0% APR special financing offers come with deferred interest. That means interest accumulates on your principal during the financing period, starting from your original date of purchase. If you own a credit card with a deferred interest offer and don’t repay your entire principal amount before the financing period ends, you may find yourself owing hundreds of dollars or more in these retroactive interest fees.
Store credit cards have high standard purchase APRs
On top of owing deferred interest going back to the beginning of the date of purchase, the credit card company will continue to charge interest until you repay the full amount owed.
Remember that in-store credit cards carry high interest rates — higher than a typical credit card’s interest — so once the regular APR kicks in and you’re hit with all the deferred interest charges, the charges can rack up rather quickly.
May need good credit to qualify
People with bad credit or no credit might not qualify for furniture financing, since many stores require that you sign up for their partner bank’s credit card in order to do so.
But here’s the thing: Even the act of applying for new credit can temporarily ding your credit score. For that reason, make sure to ask the store if it offers prequalification, an approach that assesses your creditworthiness without conducting a hard credit pull. You can get a good idea of whether you’ll get approved for financing, without hurting your credit score in the process.
Alternatives to in-store financing
Budget, save up cash and pay upfront
If you want to buy furniture, you’ll end up paying for it one way or another. So instead of getting a furniture loan, you might consider saving up the cash to pay for it.
This strategy will keep you from the risk of having to pay high interest retroactively if you can’t repay the loan within the promotional period. You’ll also own your furniture sooner and pay less for it in the process.
Go to a rent-to-own furniture retailer
Rent-to-own furniture stores offer affordable installment payment plans for those who need it. With a rent-to-own plan, you can walk in and buy the furniture you need immediately, and gradually pay for ownership over a predetermined number of weeks or months.
Rent-to-own furniture retailers often don’t require credit checks, and you have the freedom to end your contract at any time. However, rent-to-own payment plans can be much more expensive than if you bought the furniture on credit or cash outright.
If you have other options available to you, you may want to consider them instead as you’ll likely save more money with those choices. However, rent-to-own plans may be a good alternative for those who need furniture immediately but don’t have the cash upfront, or for those with bad or no credit.
Use a credit card with a 0% APR promotional offer
If you’re able to land a credit card with a 0% introductory APR, chances are its terms will be better than the ones a furniture retailer can offer you. Even if you only qualify for a regular credit card, they’ll usually still carry a lower interest rate than retail store cards, which can save you a bundle if you’re left making furniture monthly payments after the promo period ends.
If you’ve got a credit card offer with a 0% percent introductory rate on purchases, compare its regular interest rate with that of the furniture store credit card. Make sure to choose the lower-cost option, in case you cannot pay off the balance by the time the promotional period is up.
You could use a personal loan to finance furniture purchases. This option comes with a set repayment schedule, fixed interest rate and relatively quick approval process. Depending on the lender, you could borrow as little as $1,000 or as much as $50,000 or more.
However, lenders will conduct a credit check on all applicants so you’ll want to have good credit or better to qualify. The best repayment terms are reserved for those with excellent credit, although those with a good credit score can still land attractive offers.
Unlike credit cards, though, you won’t find lenders offering 0% interest on personal loans so you’ll pay more than you would if you paid with cash upfront. To save as much money as possible, carefully weigh the offers you receive and calculate your savings with each before you make your decision.
Compare multiple lenders at once with our comparison tool below:
As low as 2.49%
Minimum 500 FICO
LendingTree is not a lender. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. Terms Apply. NMLS #1136.
As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 2.49% (2.49% APR) on a $20,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected). Terms Apply. NMLS #1136
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Why Are There Different Types of Credit Scores?
You probably know that you should be checking your credit score on a regular basis—but which credit score should you check? Do you need to know both your FICO credit score and your VantageScore, or is checking one credit score enough? How are FICO and VantageScore different from each other, anyway—and why are there multiple types of credit scores in the first place?
Originally, there was just one credit scoring service, the FICO credit score, created in 1989. The three major credit bureaus (Equifax, Experian and TransUnion) developed VantageScore in 2006 as an alternative to the FICO score. Both FICO and VantageScore offer different types of credit scores depending on what kind of information lenders are requesting and which credit score model is being used.
What does this all mean for you and which credit scores should you be tracking? Let’s take a closer look at how credit scores work, the different types of credit scores and what you need to know about VantageScore versus FICO.
What is a credit score?
A credit score is a three-digit number that represents your creditworthiness. Lower credit scores indicate that you are more likely to be a credit risk, while higher credit scores indicate that you are more likely to be a responsible borrower.
Although there are different types of credit scores, the two main credit scoring models—FICO and VantageScore—use a 300-850 point credit scoring scale. Each credit score falls within a specific credit score range and helps lenders understand how you have used credit in the past and how you are likely to use credit in the future.
What are the main credit scoring models?
Most types of credit scores fall under two main scoring models: FICO and VantageScore. The differences between VantageScore vs. FICO are relatively minor, in the sense that a person with a good FICO score is likely to have a good VantageScore as well. Likewise, a person with a bad credit score under the FICO scoring model is probably going to have bad credit in the VantageScore model.
Here’s what you need to know about the different types of credit scores:
The FICO credit score was first developed in 1989 by Fair, Isaac and Company (now called the Fair Isaac Corporation). According to MyFICO, over 90 percent of top lenders use FICO credit scores to make lending decisions.
FICO offers many different types of credit scores. If you are taking out an auto loan, for example, a lender might check your FICO Auto Score. If you are applying for a credit card, a lender might look at your FICO Bankcard Score. If you don’t have much of a credit history yet, you can sign up for UltraFICO to have your banking activity factored into your credit score.
FICO regularly updates its credit scoring models to reflect changes in the industry and provide a more nuanced perspective of an individual’s creditworthiness, although these models can take some time to roll out. FICO recently released the FICO Score 10 suite, for example—but the FICO Score 8 model is still the most widely-used FICO credit score.
The FICO credit score ranges:
- Exceptional: 800-850
- Very Good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 300-579
The VantageScore model was created in 2006 in a collaboration by the three major credit bureaus. Equifax, Experian and TransUnion created VantageScore as a way to provide an alternative to the FICO scoring model. Although VantageScore uses many of the same factors to determine your credit score, it weights these factors differently.
Under the FICO scoring model, for example, your payment history is the biggest factor affecting your credit score. Under the VantageScore model, your credit card balances and credit utilization ratio are the most influential factors in credit scoring.
Like FICO, VantageScore regularly updates its credit scoring models. The VantageScore 4.0 model, for example, became commercially available in 2017 and uses trended data to track changes in credit behavior over time. FICO’s Score 10 Suite also incorporates trended data into its credit scoring decisions—but VantageScore got there first.
The VantageScore credit score ranges:
- Excellent: 781-850
- Good: 661-780
- Fair: 601-660
- Poor: 500-600
- Very Poor: 300-499
Other credit score models
FICO and VantageScore aren’t the only two credit scoring models out there. Equifax, for example, has created its own credit scoring model—and unlike the 300-850 point scale used by the most popular FICO and VantageScore models, the Equifax model uses a 280-850 credit score scale.
Other credit score providers offer credit scores that might sound unique, but are actually based on the FICO or VantageScore models. When you check your TransUnion credit score, for example, you’re actually getting a credit score based on the VantageScore 3.0 model. The personal finance app Mint offers “free Mint credit scores,” but these are also based on the VantageScore model—Mint hasn’t created its own credit scoring system.
Check the fine print to learn whether your credit score provider is using FICO, VantageScore or some other kind of credit scoring model. If you’re looking for a free credit score, try to pick credit score providers that use FICO or VantageScore.
Why do you get different scores from different credit bureaus?
Sometimes, one credit bureau might give you a different VantageScore or FICO credit score than the other bureaus. If you make a large purchase that uses a significant percentage of your available credit, for example, your credit score is likely to drop until you pay off your high balance. But it might drop more quickly with one credit bureau than with the other two.
Why? Because each credit bureau is continually adding new information to your credit file—but the three credit bureaus don’t always receive the same information at the same time.
So if you check your Equifax credit score on the first week of the month, your Experian credit score on the second week of the month and your TransUnion credit score on the third week of the month, you might get slightly different scores depending on how your credit activity has changed over the past three weeks.
There’s one more reason why you might have different credit scores with different credit bureaus. If one of your credit reports contains an error, it could affect your credit score. Since millions of Americans have errors on their credit reports, it’s a good idea to review your credit reports with each bureau on a regular basis and dispute any incorrect information you find.
How credit scores are calculated
Credit scores are calculated by analyzing the information in your credit report and assigning a numerical value to the data. This three-digit number reflects your credit history and the way you use credit. It also lets lenders know whether you are likely to be a credit risk. If you have a history of on-time payments, for example, your credit score is likely to go up—but if you start missing credit card payments, your credit score is likely to go down.
Here’s how FICO and VantageScore credit scores are calculated. Note that FICO weights each attribute by a specific percentage, while VantageScore merely identifies which attributes have the most influence on your credit score.
How FICO calculates your credit score
- 35 percent—payment history
- 30 percent—amounts owed
- 15 percent—length of credit history
- 10 percent—credit mix
- 10 percent—new credit
How VantageScore calculates your credit score
- Extremely influential—total credit usage, balance and available credit
- Highly influential—credit mix and experience
- Moderately influential—payment history
- Less influential—age of credit history
- Less influential—new accounts
How to check your credit score
There are many different ways to check your credit score. Many banks and credit card issuers provide free credit scores to account holders, and apps like CreditWise® from Capital One and Discover® Credit Scorecard will let you check your credit score even if you don’t have a Capital One or Discover credit card.
You can also sign up for a credit monitoring service. These services not only give you updated credit score information, but also track your credit report for potential signs of identity theft. Some credit monitoring options are free, while others come with a monthly or annual subscription cost.
You might even be able to access your credit score through a budget tracking app. Mint, for example, offers users unlimited access to their VantageScore credit score.
Here are some of the best ways to check your credit score online:
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