What Credit Score do You Need for a Medical Loan? – Overview
Health is wealth, and this is something we can all agree on. However, you may also be aware that to maintain your health, you need sufficient finances, thanks to the growing cost of medical treatments.
The cost of healthcare in the US is significant. Even if you have a health insurance policy, which is intended to make treatments cheaper, you could still end up having to make a partial payment, which can run anywhere between a couple of hundred dollars to thousands of dollars.
This is a dire situation for those without health insurance.
To remedy this, you can now apply for medical loans.
What is a Medical Loan?
A medical loan falls under the personal loan category which is intended to cover the cost of medical treatments only. Conventional banks and finance companies generally offer medical loans as unsecured loans.
This means that medical loans can be availed without the need for collateral. Eventually, these types of loans are safer in case the situation causes you to default on the payments, because there is no collateral attached instead of it, such as your property or vehicle.
In contrast, this also means that you should have a sufficiently satisfying credit score to avail of medical loans.
Even with a good credit score, unsecured loans tend to be more expensive than other secured types of loans. Eventually, you may end up paying a higher origination fee if your credit score is low.
What is the ideal score for a Medical Loan?
For a credit scale of 300 to 850, the ideal score ranges around 700 and above. If you have a credit score of 800 and over, then it is considered to be excellent.
The credit score for the majority of consumers falls between 600 and 750. Higher credit scores give lenders the confidence that their loan will be repaid on time, as instructed in the loan agreement. However, many lenders tend to set their standards that reconsider a good enough credit score.
On one hand, lenders may consider the type of borrowers they want to engage. Lenders may also consider the impact of current events on the applicant’s credit score, and adjust their credit score standards accordingly.
Additionally, some lenders have their credit rating program, however, the most common types of credit scores considered by the majority of lenders are the scoring system developed by VantageScore and FICO.
What is a good credit score under FICO?
FICO, short for Fair Isaac Corporation, offers a “base” score that companies consider before approving loan applications from consumers. This is the most commonly used scoring system in the credit card and auto loan industries.
The base FICO score is between 300 and 850, with a score between 670 and 739 considered a good credit score.
What is a good credit score under VantageScore?
VantageScore revised its credit scoring scale recently. Under the newly introduced VantageScore credit score rating system (VantageScore 3.0 and VantageScore 4.0) the scale ranges between 300 to 850 (similar to FICO score) and between 661 and 780, respectively.
How to maintain a good credit score for Medical Loan?
If your credit score has slumped and you want to improve it to avail of medical loans, then you can follow the below-given tips to get a better credit score:
1 – On-time payments
Making payments on time of your loan EMI helps to maintain a good credit score. However, if you miss payments and the lender ends up sending debt collectors, or if you file for bankruptcy, then this affects your credit score adversely.
2 – Credit use
The lenders also consider the number of accounts with balances, the amount the borrower currently owes and the part of credit limit the borrower ends up using on revolving accounts are also considered.
3 – Credit history’s length
The lender of a medical loan also takes into consideration the average duration of all your credit accounts, with information on the oldest and latest accounts.
4 – Types of accounts
This is also called a “credit mix”. Under this, the lender checks whether you have been managing both installment accounts and revolving accounts. The ability to manage the two accounts satisfactorily also helps to improve your credit score.
5 – Activity history
The lender also considers if you’ve applied for, or opened new accounts in the recent past.
We can safely say that a score over 600 is considered to be ideal for medical loans in the US. In case your credit score has suffered in the recent past, you can try the above-given tips to improve it and avail of medical loans easily.