Many people encounter situations where they need money, and they need it quickly. It could be because they’ve made some bad financial choices, or they need to get their car fixed, so they can use it for work. For this reason, there’s an abundance of different organizations and companies that offer loans.
If you want to find a loan, but your credit score isn’t good, the process can become much harder. Whilst it can be a barrier to getting a loan, it’s fortunately not impossible. This article provides tips for those who need a little extra help in the area of getting a loan with bad credit.
Understand What Bad Credit Is
A credit score is a number that lenders, insurance companies, and landlords use to determine whether or not you’re creditworthy. Your credit score influences your ability to receive a loan, get an apartment, and even find a job. Your score is made up of the following five factors:
- payment history (35%)
- amount owed (30%)
- length of credit history (15%)
- new credit (10%)
- type of credit used (10%)
Understand Bad Credit Loans
Because bad credit can be a sign that someone is a high-risk borrower, bad credit loans typically come with higher interest rates and fees than regular loans. Look for lenders who specifically offer bad credit loans, because not all do. Be prepared to provide proof of income and expenses, and be realistic about what kind of loan you can afford. Carefully consider the terms of any bad credit loan you’re offered, such as fees or interest rates.
As of 2021, the statisticians say British Columbia has a population of around 5.17 million people. Some specialist websites discuss bad credit loans in BC, for instance, payday loans where you can get up to $1500 in as little as 15 minutes. You can also find out what an unsecured loan is, and discover the benefits of bad credit loans.
Consider This Summary Of Possible Loans
If you are willing to pay a higher interest rate, some loans you may consider include:
- A secured credit card. This type of credit card requires you to put down a security deposit, which becomes your credit limit.
- An installment loan. These loans have fixed payments and terms, making them easier to budget than credit cards or payday loans.
- A personal loan from a mate or member of the family. Though this option may not be available to everyone, it can be a great way to get the money you need without having to pay interest.
- A credit union loan. Credit unions are often more forgiving when it comes to credit scores, and they may offer lower interest rates than traditional banks.
- A payday loan. Though these loans should only be used as a last resort, they can help you cover emergency expenses until your next paycheck arrives. Just make sure you can afford to repay the loan on time, or else you’ll end up paying even more in fees and interest.
Request Your Credit Score And Check It
You can get your credit score for free from a number of sources, including Credit Karma and MyCreditMonitor. You’re also entitled to one free credit report per year from each of the three major credit reporting agencies – Experian, Equifax, and TransUnion. To order your free report, simply visit annualcreditreport.com.
Once you’ve received the document, make a thorough check of all the details it contains. Ask about any debt that is not yours because it may be time to file identity theft charges. If you find credit report mistakes, your credit score could be artificially low. You can correct these errors by contacting the credit reporting agency directly and filing a dispute. If the mistake is corrected or invalidated, it will stay off your credit reports after seven years.
Try To Improve Your Credit Rating
Though credit scores are complicated and can change quickly, there are some things you can do to improve your score. For example:
- Pay your bills on time. One of the most important factors in credit scores is your payment history.
- Keep your credit card balances low. Credit utilization, or how much of your available credit you’re using, accounts for 30% of your credit score.
- Don’t open new credit cards unnecessarily because each time you apply for credit, it will result in a hard inquiry appearing on your credit report.
- Get yourself added as an authorized user to someone else’s credit card account. This will help improve your credit utilization and age of credit history factors.
The score you should be aiming to achieve will depend on the credit scoring model being used. Generally speaking, you want a score that’s above 700 to get the best interest rates.
Get A Co-Signer
If your credit score is less than perfect (or non-existent), you may need a co-signer to get a loan. This person would need to sign a contract agreeing to be responsible for the loan if you can’t repay it. Co-signers are usually someone with good credit who wants to help a friend or family member get a loan that they wouldn’t otherwise qualify for.
Co-signing is a big responsibility, so they should only be asked if you’re sure you can repay the loan on time (and in full) each month. If they agree, it will also help improve your credit score.
Negotiate With Lenders
Collect all the information that relates to your creditworthiness:
- payslips and bank statements that prove your income levels
- current accounts and utility bills that confirm where you live
- details of previous debts that show what kind of borrower you’ve been in the past
This information should be enough to convince most lenders that you’re capable of repaying a new loan on time.
As you can see, there is hope for your future borrowing, but you need to know what you’re doing. Get professional advice and read the fine print before signing. If you act wisely, you’ll be able to access the money you need, improve your credit rating and move on with your life.