In today’s credit based economy, banks and lending institutions are generally willing to offer loans to people who have a good credit score and who can furnish a strong proof of income along with the loan application.
Well, great, what about the rest of us with less than stellar credit ratings? The scenario is the opposite for those with a bad FICO score falling in the range of 650 or below.
If you too have a credit score of 650 or less and are wondering about how to get financing, you have come to just the right place.
A bad credit score does not necessarily mean that you will not get credit from a lending institution.
What it does mean is you can expect a tougher qualification process for the same loan and will have to pay a much higher rate of interest in comparison to the amount charged from a borrower with an excellent payment history.
Instead of opting for institutional borrowing with an unusually high interest rate, you can look for ways to get around the problem posed by your poor FICO score and get a loan at reasonable terms and conditions using alternative sources of financing..
Determine why your Credit is Bad
To begin with, if your low FICO score is impacting your credibility with the lenders, the first thing that you need to do is get a copy of your credit report and study it carefully to detect any erroneous entries or misreporting that is pulling down your score.
In case you do find errors on your credit report, you need to rectify them by disputing them and sending mail asking the credit-reporting agency to fix the errors.
Once you send the dispute to the agency, it has 30 days to verify the same or to remove the entry from your report thus bumping up your score in time.
If your poor financial management is the reason for your poor score and you are wondering about how to get credit, you can improve your chances by applying for a loan at one of the credit unions in your city.
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These non-profit and smaller cooperative financial institutions are much more open about considering the loan applications of people with poor credit scores and these unions can give equal importance to the financial history of the applicant and his or her earnestness as his or her FICO score.
Alternative Credit Providers
You can also opt for peer to peer lending service that allows people with bad credit to structure loans from known or unknown individuals who are more sympathetic to the cause of the borrower than banks and lending institutions.
The P2P lending or micro loan market is growing at a rapid pace due to the multiple benefits that it offers over traditional forms of lending.
Micro loan lending offers the option of both secured and unsecured credit extensions and the loans come at a lower interest rate in comparison to banks or hard money lenders.
P2P lending is a perfect lending option for you if you want a fixed rate amortizing loan for a period of less than 5 years.
Hard Money Lenders
In case you need a small amount of cash advance to meet a monetary emergency such as unexpected medical bills or car repairs, you can also opt for payday loans.
These short-term cash advances do not require a credit check and you can get a loan of up to $1500 deposited in your bank account within 24 hours of submitting your loan application.
Though these loans are extremely easy to get and do not require any paperwork, they come with a short repayment term, typically, of up to 30 days and have very high interest rates.
This type of loan is ideal for one-off emergencies and not topay for luxury expenses or lavish vacations.
The Value of Relationships
However, if you are wondering about how to get credit at a reasonable rate of interest despite your bad credit core, it may be worthwhile to tap your friends or family and borrow money from them.
If you share a good relationship with them and your poor credit score is a result of an unexpected setback in your business, they will be willing to take a chance on you and extend you the amount of loan that you need to borrow.
In case you do go for this option, you need to tread very cautiously to prevent souring your relationship with the lender.
It’s possible for you to save yourself a lot of trouble while learning how to get credit despite a poor FICO score if you own something of value that you can put up as collateral for the loan.
You can easily borrow against equity in your home or your gold and diamond jewelry.You can also boost your chances to get financing by asking a family member or a friend of sound financial standing to co-sign your loan as a guarantor.
It may not be a cakewalk for you to get a loan if your FICO score is low but there are solutions if you are willing to pursue them.