While it's true that having a good credit score makes getting loans and decent interest rates easier, it's not impossible to get a loan with bad credit. If your credit is already bad, you'll want to think for a while about whether or not you actually need a loan.
Until your credit improves, you should only be taking out loans for major, necessary purchases like your education or your children's educations, start-up costs for a business that will bring in more income, or an actual emergency.
There are a few things that you can do to get a loan with bad credit when you really need it.
First off, don't apply for tons of loans over a period of months. This is because each time you apply for a loan or a credit card, the company will check your credit score, lowering it a little bit each time. Your score gets lowered when companies check your credit report because the credit reporting companies think that you are going to end up with even more debt on your hands, which is not a good situation.
Secondly, check your own credit score.
Contrary to popular belief, when you check your own credit score, it doesn't affect your report at all. While it's nice to know your actual score three or four times a year, it's essential that you check your credit report this often. This is where all of the information that affects your credit score is, so you need to check it for mistakes and misprints at least twice a year.
You are entitled to receive one free credit report from each of the three major credit reporting companies, Experian, Equifax, and Transunion, every twelve months, so you can check your score for free every few months if you rotate between these three companies.
This is a great way to stay on top of your credit without paying a fortune & you'll struggle to get a loan with bad credit without it.
Next, you'll want to check out your loan options.
With bad credit, you're better off applying for the smallest possible loan that will get you by. Some options include an unsecured personal loan and a restricted credit card.
You may want to discuss these particular options with a financial advisor, who will be able to give you advice on the best option for you.
Don't forget to figure out what monthly minimum payment you can afford to make, and don't take out a loan that will make your payments higher than this, since defaulting on this loan can make your credit even worse.
Once you've taken out your loan, you can use it to get through your financial tough spot, and you can also use it to build up your credit score.
Taking out a loan that you can repay quickly will really help your credit score since you will be ahead of schedule on your payments. In order for this to happen, though, you'll have to pay more than the monthly minimum payment, which is another reason to insure that you take out a small loan whose monthly payments you can definitely afford.
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