If finances aren’t your forte, don’t fret—you can still get a loan with a bad credit score. While you should always aim for a credit score between 850 and 700, there are plenty of ways to find funds if your three-digit number dips below that magical range. Whether you need money for an emergency expense or you’re trying to consolidate high-interest debt, there’s a loan option out there for everyone.
Work on Improving Your Credit Score
If you aren’t immediately in need of cash, take the time to understand your credit score and improve it. There are plenty of services that provide free credit reports so you can get a better picture of your repayment history. Correct any inaccurate listings that could be bringing down your score, and then get to work on creating a healthier financial future.
While your score weighs various factors to different degrees, it’s never a bad idea to work on all of them simultaneously. Be sure to:
- Make all your payments on time. This is always the best way to improve your score! If you can, try to take get your balance to $0 at the end of each pay period instead of just paying the minimum amount. Try using a budgeting app or online tool to help you manage all your various payments.
- Lower your debt-to-credit ratio: You only want to use about 30% of your credit limit at a time. This shows that you are not constantly overspending and pushing your credit to the max.
- Keep old accounts open. Having a longer credit history looks good because it indicates that you’ve been responsibly making payments for many years. With age comes wisdom!
- Have a mix of credit lines. This will most likely happen as you get older and experience major financial events, such as buying a car or paying a mortgage.
Look at Secured Loans
If you need a loan pronto, look into getting a secured loan. This mean providing collateral that the lender can seize if you fail to repay the loan. Cars and real estate are the most common forms of collateral when signing up for a secure loan. Even with terrible credit, lenders will be more likely to take the risk on you because they have a guarantee of being paid.
But be careful to avoid predatory lenders. Never agree to a short-term high-interest loan—it’s likely you won’t be able to pay it back on time and then your property will be seized.
Join a Credit Union
It’s often easier to get a loan through a credit union than through a big bank. Why? They look at more than your credit score when deciding whether to take the risk on you. However, you typically have to be a member to apply. That makes this an excellent option for personal loans because credit unions are invested in the financial health of their members. But if you aren’t already a member, you might have to pull out all the stops to convince your local credit union to give you backstage access.
Find a Co-Signer
Even though you have bad credit, it’s likely someone you know and trust does not. If you get a friend or family member to co-sign on your loan, the interest rate for your loan will be based on their credit score. This can certainly work in your favor, but you want to be confident that you’ll be able to repay the loan. If you don’t, your co-signer will suffer the consequences as well.
Loans to Avoid
Although there are plenty of good options to secure a loan with bad credit, there are many routes you never want to go down. Payday loans, for example, are one of them. Whether it be on TV, signs on the street, or at unassuming office buildings, advertisements for these “quick cash” lenders are everywhere. While it could seem tempting when you need emergency funds, payday loans can have insanely high interest rates. It’s quite common to get a 300% APR—which then traps you in a cycle of debt that’s very hard to shed.
No matter what your credit score may be, there’s plenty of ways to secure a loan that features practical terms and conditions. Keep an eye out for predatory lenders who use the fine print to keep you in debt, and always weigh your options before deciding on a loan. Your f