If you think you’re alone by having bad credit or no credit at all, fear not. With approximately 26 million Americans having no credit history at all, you’re in good company.
Having bad credit will make it a little harder to get the money you need for the larger purchases in life, but it is not impossible.
This guide will help you learn more about how to get a loan with a bad credit score. So, go ahead, read on.
Bad Credit Affects How To Get a Loan
If you are starting to explore the world of credit and loans, then you will first want to find your credit score. The most popular scoring system being used by lenders today is from FICO. Your credit score will range from 300 to 850, and if you have a score below 630 – you have bad credit.
A bad credit score can be challenging, but it’s not the end of the world. Let’s look at what hurdles you will be dealing with when searching for loans with bad credit.
Finding Bad Credit Lenders
When looking for bad credit loans, trusted companies like RightWay Funding can be a lifesaver. However, it would help if you kept in mind the actions that still affect your credit score when applying for a bad credit loan.
One of these actions is called a credit inquiry performed by the lender when assessing your application. Every credit inquiry on your credit report will lower your score for a certain period.
So, please, do your research and talk to a lender before applying.
Dealing With Higher Interest Rates
The lower your credit score, the higher your interest rate. It’s just a matter of fact for most lenders to take on the risk of lending you money. This higher interest rate works to offset the amount you still owe on the loan if you default.
Fixing Your Credit Before Applying for a Loan
If you can wait a little longer before making that big purchase and fix your credit score in the process, you will potentially save thousands of dollars in interest payments.
Depending on which method you use to fix your credit, you may be waiting days, weeks, or months before seeing an improvement. So let’s take a look at what some of those methods of improving your credit score are.
Lower Your Credit Utilization Ratio
Did you know that your credit utilization ratio accounts for 30% of your overall credit score? Yes, it is a big deal. Your bad credit lender will take this number into serious consideration.
If you have a credit card with a ten thousand dollar limit and three thousand dollars on the card, your credit utilization ratio is 30%. This is the threshold for a reasonable credit utilization rate. Any number over 30% dramatically reduces your chances of receiving the loan you need.
Dispute Credit Report Errors
Finding out what you need to repair on your credit report is just as important as finding your credit number. It should be one of the first tasks completed on your search for a loan.
Take the time to review the details of your report and start communications with your creditors immediately. If you don’t have the time to handle ongoing communications with your existing creditors and lenders, find a credit repair agency.
Don’t Let Bad Credit Ruin Your Next Loan Application
With a bit of discipline added to your newfound knowledge, you can work towards improving your credit score today. Don’t be afraid to do more research on how to get a loan with a bad credit score, and reach out to a trusted credit repair agency for more immediate assistance.
If you found this article helpful, then head over to the money section of the blog for more great personal finance information. See you there.