When you’re applying for a loan, you may feel a bit nervous, especially if your credit score isn’t as good as it could be. There’s no need to panic. A bad credit score isn’t the end of the world, and there’s so many things that can affect it.
Before you start researching loans, you should request a copy of your credit report first. There are three credit bureaus – Experian, Transunion, and Equifax. You are entitled to a free report from each of them on a yearly basis. When you receive the report, you need to go through it carefully, and dispute any mistakes on it.
Even if your credit history isn’t great, or if you’ve never taken out any form of credit before, you can still apply for a loan. Traditional lenders such as banks are likely to refuse your loan application, but they are not the only lenders. The strict, and seemingly impossible criteria for bank loans means that there are many online lenders you may be able to help you get the loan you need. Whether it’s car loans, loans for your mortgage, or a loan to pay off your credit cards, direct lenders are much more likely to approve your application.
If a bank loan is a no-go for you, you should consider alternative lenders. Credit unions may offer personal loans. Your local credit union may be more willing to offer you credit. However, there are often some rules and regulations around this, such as membership, and proven track record of saving.
Online lenders, and direct lenders are other options. These tend to be a new breed of credit lenders. Many people with a poor credit record, or no credit record have been approved for loans with these alternative lenders. They don’t just offer payday loans, but you can apply for loans for mortgages, car loans, and personal loans. It’s also true that people with a poor credit rating are often subject to higher interest rates, but with alternative lenders, this isn’t always the case.
Improve Your Credit
When you apply for a loan, even when you have a bad credit score, you should approach it as a way of improving your credit. Make sure that you make every payment on time. If you are having financial difficulties, call your lender. Most lenders will be willing to work with you to help you through your problems.
Sarah Patterson, a manager of creditcube.com, says that there are other tips to improve your credit. He said that making timely payments and keeping on top of your credit limits is only part of managing your credit.
When you’re shopping for a loan or credit card, you should make all your applications within thirty days. If the applications are spaced out over a longer period, then your credit report will show each application, and it read as though you are having money issues. However, if you make all the applications within a thirty-day period, it should be treated as a single application, and that you were just shopping around for a better rate.
Also, if you are experiencing financial trouble, then you shouldn’t close your accounts. Instead, talk to your lender about reducing your payments, or a payment plan.
Essentially, if you need a loan, and you do have a poor credit rating, then all hope is not lost. There are credit agencies and alternative lenders who will be willing to extend credit to you, even if the traditional lenders are not.