How to Get a Loan With a Bad Credit Rating
There are lots of reasons people have a bad credit rating. Two of the most common are bankruptcy (which remains on your credit history for seven years) and making late payments on your current loans. If you have a bad credit rating, it can make getting future loans both more difficult and a lot more expensive. Some lenders simply refuse to make loans to borrowers with a poor credit score, while other lenders are willing to make loans but at a high rate of interest. If you're in the market for a loan and your credit is less than perfect, there are a few ways to get the cash you want without paying an arm and a leg.
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Instructions
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Plan ahead. Give yourself enough time to improve your credit score before applying for a loan. Pay all current loan payments on time for at least two months.
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Stop or reduce the use of credit cards in the two months prior to applying for a loan. If creditors see that you have reduced your use of unsecured loans and you are paying your bills on time, they are more likely to make a new loan to you at a reasonable rate of interest.
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3
Take out a secured loan and repay it within 30 days. This will increase your credit score and improve your chances for an unsecured loan at a better interest rate. Secure a loan with your home or with cash or other instruments on deposit with your lender. Put loan proceeds in a savings account and then use those same proceeds to repay the loan in 30 days (you will have to pay a few dollars of interest out of your own pocket).
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Check out your credit score. You can obtain one free copy of your credit report each year from each of the three major credit agencies (see Resources). If your credit score is still below 650 then repeat Step 3 until your credit score is 650 or better.
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Apply for your loan with your improved credit score.
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Tips & Warnings
Many lenders are willing to give loans regardless of your credit score, but the fees and interest rate you will pay could be exorbitant. If possible, improve your score before applying for a loan.
