Having bad credit can be a very frustrating and often limiting thing to go through when it comes to getting a loan. When your credit score is considered poor or low, many lenders aren’t willing to take the risk on you for fear they won’t get their money back. So, what happens if you have bad credit but you need a loan? Is it even possible or will your credit rating prevent you from being approved?
Here we’ll take a look at what it means to have bad credit, how it happens, how it affects your ability to get loans, and how you can go about remedying your bad credit.
What is “Bad Credit”?
Bad credit means you have shown a history that you aren’t able to keep up with payments to your creditors. This could be credit cards, loans, a mortgage payment, a car payment, etc. In some cases, it means you are late with payments, in other cases it means you may not have paid them at all and are now several payments behind. It makes you look untrustworthy to creditors.
All this information plays into your credit rating. The information is sent to the credit bureau and then analyzed to give a credit rating. Any time someone checks your credit rating, such as a new lender, they will be able to see this information pop up.
Check Up on Your Credit Rating
Perhaps you’re not sure what your credit rating is. If that’s the case, it doesn’t hurt to find out. This can be done by checking your credit report. Here in the U.S., you are able to do this once a year for free. You may even be surprised by what shows up on there, which is all the more reason to take advantage of this free report.
Bad Credit and Loans
One of the most glaring effects of bad credit is the fact it can make things very difficult when it comes to being approved for a loan or credit. It’s important to note that it’s not impossible, but it certainly won’t be an easy road. Chances are, you will need to find a lender that deals with high risk clients, which also means you will probably pay a higher interest rate. Another way you may get approved is by taking a loan that has very restrictive terms.
There are all kinds of creditors out there who claim to offer loans to anyone with bad credit, but you need to be wary that some of these aren’t on the up and up. You will still want to check around, compare rates, compare terms, and do a little research on the lender.
Additional Effects of Bad Credit
Besides it being difficult to get a loan, there are other negative effects of bad credit. You may find it hard to rent an apartment, get a new job, get affordable insurance premiums, get a new cell phone, and obtain security clearance.
How to Improve Your Credit Score
So, what can you do to improve your credit? Well, there are a few steps you can take. One is to get a brand new credit card so you can start to build good credit. You may have to put down a deposit, pay a high interest rate, and settle for a low maximum balance, but this will help you to establish better credit.
Another way is to make sure you don’t miss any payments going forward. You want to set up new and positive habits.
Don’t Let Bad Credit Stop You
Bad credit is something that people should take seriously and find ways to better their credit rating, at the same time it’s something that shouldn’t hold you back. There are still lenders out there who are willing to work with you and give you a chance. So it’s time to stop worrying about bad credit and start doing something with whatever leverage you have left.