Here at Moolr, we are often asked by potential borrowers whether their mixed or poor credit history will prevent them from taking out a loan. We do not lie – it can be restrictive, but it does not mean for sure they cannot get finance. So let;s take a look at how to improve your chances for a bad credit loan.
Bad credit is based on your credit score. Your credit score is what the lender looks at to decide if they should give you a loan. It is based on things like:
The lender is looking into these things to decide whether you can handle a loan responsibly. Bad credit could mean that your credit score is not considered good by the lender based on the above.
Things like missed or late payments or declaring bankruptcy could lower your credit score and this means you could have bad credit. A good credit score usually means that you will get a better interest rate from the lender.
Although having a poor credit score can mean it is often harder to secure a loan, keep in mind that different lenders have different criteria when they look at your credit history. Some lenders might see your credit score more positively than others.
Bad credit loans are loans that are designed for people with a low or bad credit score. Lenders offer these loans with a high interest rate because of the risk that is involved in lending money. If you want to avoid paying a high interest rate, there are other types of loans you could get:
Secured loans could be a good option if you have bad or less than perfect credit. A secured loan gets “secured” against something you own, like your car or house. To secure a loan, you have to promise something you own as collateral, in case you cannot pay the money back. A secured loan means that a lender can offer you a bigger loan for a long period of time, which could be helpful if you have a poor credit score.
Unsecured loans can be very difficult to get if you have a low credit score, and often have a high interest rate. You could get an unsecured loan if you have a person with a good credit score who can commit to paying your loan repayments if you miss them – a guarantor. This could be a good option if you are looking to borrow money without wanting to secure something you own as security against the loan. Keep in mind though, this can be a big risk for the guarantor. They are responsible for your loan, even if it is you who is responsible for paying the money back.
If you are looking to improve your credit score, there are a few things you could do. Here are some of the main ways you could change your less than perfect credit score into one that could help you secure a loan:
Your credit score is based on your credit report. A credit report is a record of information about your credit history. If information in your credit report is wrong, like how much money you borrowed and if you paid your bills on time, your credit score could be impacted.
Spending small amounts of money and paying off your bill each month could make you look responsible to lenders and this can help boost your credit score. It shows that you can pay back any money that you borrow.
Avoiding to max out your credit limit can also be better for your credit score. What’s more, lenders want to see that you are able to manage your money and reaching your credit limit can sometimes have a negative impact on your credit score.
Too many loan applications in a short period of time can sometimes affect your credit score. If a lender rejects your loan application, you can help yourself to be cautious about applying for more soon after. Every time you make an application, a hard search is made on your account and the credit agency leaves a mark on your credit report.