Financing Options When You Have Low Credit Scores
In today's credit-driven society, credit scores are almost as important as the credit itself. In fact, credit history is a major factor in determining your credit score. That makes it difficult for people who've had problems managing their credit to buy things like cars and houses without first building up their credit ratings.
But there are options out there for you if you have a low credit rating or none at all. Many of those options involve loans - borrowing money from a financial institution on the promise that you'll pay it back with interest by a certain date. Financial institutions assess your creditworthiness and determine how much money they will lend based on your ability to repay, which includes an evaluation of your income, assets, and debts as well as your payment history.
If your credit is low, it's important to know that there are still methods of financing available for purchases like vehicles and homes. You just need to know where to look. Below are some options for credit when you have bad credit or no credit.
1) Be aware that having good credit makes borrowing much easier
Make sure you don't take on obligations in excess of your income capacity. Maintain open communication with the lender about what you can afford to pay so they can promptly let you know if there's a problem or if an extension needs to be requested. Make sure not only your creditors but also the lenders themselves are informed about your financial situation but do this in positive, proactive manner . It's also never too late to improve your credit rating.
2) Credit unions and other credit institutions
Credit unions are a good place to look for credit when you have bad credit or no credit . They're often easier about lending requirements compared to banks and credit card companies, but may still want a cosigner who has better credit. For this reason, some people choose to get married before applying for a loan from a credit union in order to improve their chances of getting the money they need without having to ask someone else for help or more money.
3) Loans from friends and family members
Yes - loans from family members and friends can be an option if you have bad credit or no credit . But since there's always room for to go wrong during financial transactions between friends and family members, it's best to put everything in writing. You may also want to consider charging interest on the loan.
4) A credit repair service
Credit repair services can help you improve your credit score . A credit repair service typically focuses on removing negative things from your credit reports such as late payments, bankruptcies and collections. These services are available only for those who have bad credit or no credit and don't mind paying a fee for them. A word of caution: make sure the credit repair company isn't engaging in illegal credit repair practices like trying to change the dates and amounts of old debt (the FCRA makes this illegal) or sending fake documents to credit reporting agencies that will eventually harm your credit score instead of improving it.
Some Personal Loan Providers Can Work With Borrowers With Credit Scores Under 620
5) Personal loans for people with credit scores under 620
The same lenders that won't work with credit scores under 620 will often make exceptions and offer personal loans to applicants who don't meet credit score requirements if they can provide steady income and an asset to use as collateral. Others require a cosigner whose credit score meets the lender's minimum credit score requirement in order for you to qualify.
6) Shopping around is key
When looking for credit when you have bad credit or no credit, it's best not to rely on one source alone. Instead, make sure you shop around or ask lots of questions so you can compare rates and terms from different lenders before making a decision about which loan is right for you. That way, whether you have credit problems or not, you can get your money as quickly and easily as possible.
Credit is a complicated topic that's often misunderstood by many people. If you need credit help, don't hesitate to contact one of the credit counseling agencies in your area for a free consultation. These credit counselors are usually non-profits with years of experience dealing specifically with credit issues.