Ways to Qualify for a Loan With Bad Credit
One thing you don’t want to get in the bad side of is your credit rating. Purchasing your home, paying for your education, acquiring your car, finding a job, and acquiring a palatable interest rate for a loan all depends on your credit history. Lenders judge you based on your credit score. But what if you are just starting from scratch or you have an existing credit history that is terribly broken? Fret not because having a bad credit score doesn’t mean all hope is lost. Here’s how you can do it:
Understand That Credit Isn’t Built Overnight
An excellent credit score is not built quickly at all. It starts during the moment you have your first credit card. But here are some tips on how you can get a better one:
- Be intentional on how you spend and borrow money
- Be mindful of your payment history and ensure everything is on time.
- Avoid credit pitfalls like getting too many credit cards.
Take note that building your credit from nothing means that you need 6 months for an actual credit rating. Scoring credit algorithms need 6 months worth of data from an active accound before they can start grading you.
Get a Secured Loan
If your credit history is shot, banks will undoubtedly give you a hard time to get a loan. Try to opt for a secured loan or secured credit card version. This means that you need some measure of security against the credit limit or the loan amount in order for you to approved. The deposit you make can be anything of value like your home, jewelry, or car acts as the collateral, which assures the bank that the money they release is safe in your hands. This is then refunded when you close the card and pay the loan. Banks will likely approve you faster because the collateral minimizes the risk. Noteworthy: be very careful what you put in as your collateral because if you are unable to make payments, you will forfeit it.
Consider Being an Authorized User
Ask to be an authorized user on a friend’s credit card if you need the money badly. This means a person with a major credit card allows you to share and gain access to his credit privilege. Of course, you must have a decent relationship with this person in order to get this option. Don’t break the trust by being remiss on payments. Being an authorized user or joint user means you receive your own card with your name on it. The credit balance of this card is then shared with the main owner. Being an authorized user gives you access to spending money; and most of, all being one can start your credit score rolling. Be sure to request the credit issuer to report your spending patterns to a credit bureau, so you, too, can get your credit rating from each transaction made in the supplementary card.
Get a Co-signer or Guarantor
If you want to purchase something but don’t have any credit standing whatsoever, then ask someone for help. This person must be someone you trust and someone who trusts you because he will be a co-signatory to the loan on your behalf. Piggy-backing on someone’s good credit has long been done by those starting their credit history from the ground up. Of course, the person you choose must have a good credit history or you can kiss that loan goodbye. By co-signing, this person agrees to be a guarantor who will cover your loan payments should you default on them. This joint liability limits the risk of getting the loan so your chances for approval greatly increases. Keep in mind that your subsequent payments will affect your guarantors credit standing so keep updated with all future payments. This is the least you can do for the person who has gone through great lengths in ensuring you get the loan. Once approval has been given, you can start building your own credit, and in the future you will need to ask for no more favors from anyone.
Consider Personal Installment Lenders
Stay away from payday loans that give you the quick cash but jack up the interest rates to thirty percent. Steering clear from these loan sharks is necessary no matter how much you need the cash because they will keep you in greater debt. Instead, consider a personal installment lender with better options. This kind of personal loan can cover emergency needs and they evaluate more than your credit score so you have a better chance of securing a loan from them. Double check the lending company’s business standing at the Better Business Bureau and read online reviews. You want to make sure you’re doing a transaction with a legit personal lender and not a crooked loan shark ready to take advantage of your dire situation.
Join a Credit Union
These small organizations have been known to give options for people borrowing on bad credit. They are similar to banks, but with less stringent requirements. When you come to apply for a loan, they don’t just rely on the credit score. The main consideration with Credit Unions is you have to be their member. Your goal now is for them to grant you membership and they take a look at not just your financial standing but where your address is, where your place of work is, and where you went to school. Sometimes, being endorsed by an existing member truly helps in securing you a place within the union.
If you happen to be a part of those with poor credit history, don’t feel dismayed if banks turn you down. In fact, expect it to happen. Or if they do agree to give you a loan, brace yourself for high interest and unpalatable terms. Sadly in this world, people get judged for their credit standing. Just remember that you have other options and exhaust all efforts into making those happen.
It is critical to remember to never accept a pay day loan no matter how tempting it is or how dire your situation is. Pay day loans are very dangerous because they trap people into this predatory cycle of being in permanent debt. Don’t start this slippery slope because you will struggle getting out of it. What is important now is for you to remember that your terrible credit isn’t going to last forever. If your credit rating leaves much to be desired, consider how to build your positive credit score given your limited resources. All hope is not loss because the power of improving your credit rests in your own hands.