It’s very challenging to get a loan if your credit score is not good. No need to worry anymore, we are here to help you with the all information about your credit scores and ways to upgrade them. Yes, You got it right. You can avail of the loan even with a lower credit score. Here, we will discuss bad credit and learn how to get a loan with bad credit: A Comprehensive Guide.
What is Bad Credit?
As we have told you, you can get financial help even after having bad credit. So, before dwelling on it, let’s know what bad credit is. A credit score is a number based on your financial transaction of the loan; it’s more about your loan repayment behavior. It ranges from 300-850. If you are near 850, you have a higher credit score.
If you are near to 300 or, say, below 600, then you have a bad credit score. It can vary in different places. Let’s look at the scores.
- Excellent -750 and above
- Good -700-749
- Fair -650-699
- Bad-below 600
Bad credit scores can be due to many reasons, including absence of repayment, bankruptcy, or many loans at once.
One example of bad credit is that John failed to repay many credit cards and was declared bankrupt a few years ago. Due to past failed repayments, his credit score has fallen to 550. This got him into a bad credit category.
Also read: How To Boost Your Credit Score
How to Find Out Your Credit Score?
Knowing your credit score to apply for a loan is essential. According to your credit score, you will learn about the loan you can avail of with the interest rate. You can know your credit score by following ways:
- Contact your bank or financial institution: Online banking services provide credit scores if you request them.
- Use a free online service: Some financial websites help you to know your credit score, like Credit Karma and Credit Sesame. This website also provides tips to improve credit.
- Request your credit report from credit bureaus: Some credit bureaus like Experian, Equifax, and Trans Union help you to know your reports if there are any errors. You can also dispute them if it’s necessary.
How to Get a Loan If You Have a Bad Credit History?
Despite having bad credit, you still have options when it comes to securing a loan. Here are four possible avenues:
1. Secured Personal Loans
You can get a secured personal loan in which you must put something valuable as collateral. The collateral can be a car, land, home, etc. The collateral acts as security if you fail to repay. Even if you have a bad credit card, the collateral will help you get a loan. So, always remember to make a payment; otherwise, the lender is in charge of seizing your collateral.
2. Co-signer Loans
A co-signer is someone who can help you to get a loan. They can be any friend or family member with a good credit score. They can co-sign for your loan, as their credit score will be considered. This helps you to increase the chance of getting a loan. After getting the loan, the co-signer will be legally responsible for your loan. So please make sure to repay, as it will affect their credit score.
3. Peer-to-Peer Loans
You can also go for Peer to Peer Loans if you have bad credit. A lender can be an individual or a group of people who can lend you money through an online platform. They might have higher interest rates. Getting a peer-to-peer loan is flexible and will look at other things rather than credit scores.
4. Payday Loans
Payday Loans are best for bad credit scores. This short-term loan charges you higher interest but the process is really quick. So, it can be risky.
Tips for Improving Your Credit Score
Improving your credit score for an excellent financial reputation is always important. Let’s discuss some ways to get back a good credit score:
1. Make timely payments
Timely payment is a great way to improve your credit score. Set up a reminder to make the payment on a date.
2. Reduce your debt
Having more debts at a time can lower your credit score. So, try to reduce your debt by paying it off systematically.
3. Keep old accounts open
A credit score is vital to getting a loan, and ancient credit history is beneficial to improving credit scores. If you have an old account available, then it always counts on the better side.
4. Limit new credit applications
Avoid applying for a new loan when you already have a loan. It is because the inquiry can be made on the credit report, which affects the score badly.
No need to worry anymore about getting a loan with a bad credit score. Now, you can get financial help through the options above. Always remember to improve and maintain a good credit score to get more possibilities of getting a loan in the future. It will give you a financial security. With good planning and determination, you can easily manage your finances. This will in turn help you recover your basic credit score. So, don’t worry, and keep focusing on getting a good credit score. All the best.