Having a credit score of 524 means that you have some work to do. Ranked squarely in the lowest tier of scores, you are facing elevated interest rates on any loans and credit you are able to obtain—or rejection from them all together.
There is confusion on how credit scores actually affect car and home loans and credit cards. Will the interest rates be too high for me? Will I just be rejected? Luckily, it’s all answered below.
1. Home Loans
For a first time home buyer with a credit score of 524, you will most definitely be fighting an uphill battle. The majority of loans will reject you outright as your score is lower than their usual threshold of 620 by almost 100 points.
If you do find a loan that is willing to take you, the lower your score, the more that your interest rate skyrockets. With a score that low, the amount of interest you pay on the house could be upwards of half the principal loan, a lofty price to pay for poor credit.
Increasing your score is going to be your best bet to getting a decent home loan. It may take a couple years to fix and it will be frustrating, but even 100 more points on your credit score can improve your chances drastically and knock an interest percentage upwards of 2%!
2. Auto Loans
Car loans are similar in terms of interest rates and possible rejection through conventional means, but a car loan will be at least easier to find. The rates may once again be too high for you to consider this a viable choice, though.
Using the average $27,000 dollars for a car loan and a 60-month loan, a score of 524 could land you an average APR of upwards of nearly 16% and an interest over the life of loan of nearly $12,000 extra dollars!
Once again, it is in your best interest to improve your score or you may fall victim to predatory lending.
3. Credit Cards
Credit cards are not going to be easy to come by, either. This is the unfortunate fact of having a low score. Honestly, obtaining an unsecured credit card will probably be impossible. However, unsecured credit cards, or ones where you must make a deposit to obtain, will be beneficial to improving your score.
Your score may even jump by opening the card. And if you pay off your debt on time every month, the number will continue to climb.
So What To Do?
You will need to improve your score to be put into a more comfortable position. You may be able to get loans, but the interest rates will be high and could nearly double your loan… Start with a secured credit card and work your way up and pay on time every month. You’ll be glad you did.