Have You Got a Bad Credit Rating? Here’s How to Get a Loan Regardless!

You need a loan but you don’t have the credit. What can you do? Is bankruptcy your only option?

Fortunately, no. It is still possible to get a loan with a bad credit score. And we’ll tell you several ways to do it. Read on to discover how you can be approved for bad credit loans.

What is a Credit Score?

First, let’s get some context about what a credit score actually is. A credit score is a rating system that measures how responsible you are when borrowing money. It’s basically a report card that grades your borrowing activities.

If you’ve never borrowed money (taken out a loan or used a credit card), your score is 0. If you borrow money often and always pay it back on time, your score goes up.

But if you’re late making payments or have a bunch of debt that isn’t getting paid off, your score goes down. These things show you don’t handle borrowed money well.

Why is a Credit Score Important?

Your credit score tells all the lenders in the world whether or not you can be trusted with their money. They will only lend you as much money as they can trust you with.

A good credit score gets you a loan because it shows you can be trusted. But no one wants to lend money to an unreliable borrower. The risk that they won’t get their money back is too great.

How do You Know if Your Credit Is Good or Bad?

Here’s a general breakdown of FICO credit score rating.

  • Excellent: 800-850
  • Very Good: 740-799
  • Good: 670-739
  • Ok: 580-669
  • Bad: 300-579

If your score is under 580, you’ll have some trouble getting loans.

How to Get a Loan With Bad Credit

Unfortunately, as fair as we try to make our laws, sometimes things just go wrong. Someone you cosign with can make a bad decision that drags your credit down with theirs. A sudden, unexpected debt you can’t pay can turn your financial situation (and your credit standing) upside down.

Your bad credit may not be your fault, but it’s still your problem. But for every problem, there’s a solution. And if you need a bad credit loan, we have several solutions below.

  1. Don’t

This, honestly, is the best solution. If you don’t need the loan immediately, taking it out now is going to make things harder for no reason.

Plus, if you can hold off for a few months, there are several ways to raise your credit score up to good standing first. This is far from a comprehensive credit repair guide, but here are some quick and easy ways to repair credit before the loan, if you have time.

Check Your Credit Report For Errors

Get a printed copy of your credit report for free. Read the entire report and check for errors. Look for any negative marks against your credit.

If you see one that doesn’t look familiar, it’s probably a mistake. If you dispute these items and they are found to be mistakes, they are removed from your credit report and your score goes up.

Pay On Time

Late payments hurt your credit. If you have a hard time paying bills at a certain time of month, call the companies you are paying the bills for. Explain the situation and ask if they can move your monthly payment date.

You can also warn companies when you can’t pay on time. If you give them a heads-up, they’ll usually arrange a different payment date for that month and won’t report it as a late payment.

Become an Authorized User

If you have a close friend or family member with good credit, ask if they’ll do you a favor. If they let you become an authorized user on one of their credit card accounts, all their good credit from that account is added to your credit report.

You don’t have to (and you shouldn’t) use the credit card, you just need to be authorized. This won’t affect the primary cardholder’s credit at all.

Be warned though, you are affected by the negative actions of the primary cardholder as well. If they start missing payments on the card, it will hurt your credit.

  1. Credit Unions

Local credit unions are usually smaller and, therefore, more understanding than banks.

Big banks have so many customers, they can afford to be picky about who they lend to. Credit unions need borrowers too, but they don’t have as large a reach as big banks. As such, they’re more likely to “take what they can get.”

They will often assess your situation personally rather than immediately turning you down because of your credit rating. You may be able to negotiate a loan with them.

Also, interest rates for credit union loans cap at 18%.

  1. Online Lenders

Online lenders, including peer-to-peer lenders and marketplace lenders, also tend to be less choosy than banks. Peer-to-peer lenders are individual investors who choose who they want to invest in.

To get a P2P loan, you post your loan request online and the investors review it. Based on your credit and other factors, they decide whether or not to loan you the money.

Online personal loan lenders are like small, online banks. But they often have unique loan approval standards that consider more than just credit. In fact, some of them, don’t even check your credit. A service like Bonsai Finance can link you up with such lenders.

  1. Put Up Collateral

You can sometimes get a secured loan from a bank by pledging something of value against the loan, like a car or boat. This way, it eliminates the risk to the lender.

If you can’t pay the loan, they collect their money by selling the collateral. For this reason, it’s not a good idea to use your home as collateral.

  1. Borrow from Friends or Family

If your credit is so bad that none of the above will lend to you, friends and family may be your only choice. But before you do, be absolutely sure you’re able to pay so you don’t drag them down with you.

It’s one thing to bankrupt yourself. Far worse is burning your bridges and bankrupting your loved ones.

If you borrow from them, make it official. Get it in writing and pay on time as you would for any other lender.

Alternatively, you can have a family member cosign a loan for you. But if you don’t pay, it will ruin the cosigner’s credit.

Bad Credit Loans

These bad credit loans can get you the money you need. And if you make payments on time, it can build your credit back up.

But remember: if you default or don’t pay on time it will hurt your credit even more. Don’t take out a loan with bigger monthly payments than you can handle. And whichever loan you decide on, borrow responsibly.

Click here for more advice on getting bad credit loans with low income.

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