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If you have a bad credit history, you will know that getting a loan is not going
to be an easy task. Not every lender will grant loans to people with bad credit.
In fact, most banks, credit unions, and mortgage services will not even consider
loan applications unless you have above average credit score. After all, a person
with bad credit most likely have a history of missed or late payments. However, there
are quite a few good tricks and useful tips that will make the entire process of
getting a loan easier for you.
The term credit score usually refers to your FICO score, a number based on a formula
developed by the Fair Isaac Corporation. Fair Isaac looks at a summary of all your
credit accounts and payment history. FICO scores range from 300 to 850, and Fair
Isaac calculates them for each of the three big credit-reporting agencies – Equifax,
Experian and TransUnion. Generally speaking, the higher your score, the more money
you can borrow and the less you will pay for the loan. To see your actual score,
you need to pay a small fee. You can go through Equifax, Experian or TransUnion directly,
but be aware that the score you order may be one developed by the agencies themselves,
such as the TransUnion TransRisk New Account Score, Experian Plus or VantageScore.
Knowing your credit score will allow you a better idea as to why your credit score
is so low. You need to go through the credit scores in detail so that you can look
for any errors or misrepresentations.
If there are any errors, there are simple ways to have them removed. Sometimes it
is as simple as calling the creditor that reported the bad information or you just
need to write a letter challenging the error. Either way, removing errors in your
credit report is the fastest way to improving your credit score. Do not forget, your
credit score is what determines your credit worthiness to the lenders. If lenders
consider you as a high risk customer, then they will be less likely to grant you
the loan. So you need to establish a good credit score.
If your credit score is bad but not below 580, you can still get a good interest
rate from a legitimate lender. So the trick here is to improve your score a little
and then apply for the loan. There are numerous ways which you can improve your credit
score. The first and the most important way is to pay off all your bills on time.
If you can show that your most recent payment history is good, despite past credit
problems, many lenders will give you credit. Making a sincere effort to manage your
credit responsibly will help to raise your credit score over time and bring about
a great improvement in your credit score quickly.
Another way is to pay off your debts rather than moving it from one credit card to
another. Most people assume that moving the debt from one credit card to another
will give them a better interest rate and improve their chances of paying off the
debt. But the debt keeps piling on and it further degrades your credit score. If
you close multiple credit accounts in a short time period, it will cause your credit
score to go down further. Even if you close a lot of your existing credit accounts,
it will still harm your credit score. So use these tips to improve your credit score.
If you have a bad credit history or bad credit score then more lenders will be comfortable
to give you a secured loan rather than an unsecured personal loan. A secured loan
technically has much better terms and conditions as compared to an unsecured personal
loan. The term period for the loan can be much higher, the interest rates can be
much lower, the eligibility criteria is less stringent and even the amount you borrow
can be much higher. The only downside is, in secured loans you have to pledge your
home as security. In case you defer from the payments, you may lose your home as
The reason the lenders prefer lending you a secured loan is because they consider
you to be a high risk customer. If they have your house as security or collateral,
then the risk is significantly reduced. If you default on the loan, the lender can
sell the house to make up for the loss. If your bad credit is directly related to
lower income, making steep loan payments on time can be tremendously difficult. With
a house on the line, getting too far behind on the loan can come at a very high cost.
Thus you need to think very carefully before agreeing to a secured loan. On the other
hand if you are willing to pay on time, then you will definitely prefer the secured