Your credit score plays an integral role in getting funding approval. If you’re looking to take out an auto loan, getting a mortgage, or paying for your child’s braces, a poor credit score can limit your options.
While it’s not impossible to get funding with bad credit, it can be challenging. Here are some options to consider and tips for future success.
Work with a Credit Union
Credit unions are often more accessible when it comes to securing a loan. As these organizations are nonprofit and exempt from paying taxes, they’re able to take on higher risk clients. Credit Unions are also more likely to take a human approach and look at your entire financial history, rather than making judgments based on a credit score alone.
Working with Friends or Family Members
Another option for securing funding with bad credit is to work with friends or family members to borrow money. You’ll need to navigate this option carefully, as it can be a source of contention. It’s in the best interest of both parties to have papers outlining a payment plan drawn up and signed.
High-Interest Loan Options
If you have poor credit and are in desperate need of funds for a temporary loan, payday loan companies are an option. The challenge with these loans is that they are usually short-term with incredibly high-interest rates. Some high-interest loan companies hold vehicles as collateral and will repossess them if you default on your loan.
Regardless of whether you use a payday loan company or secure funding through a credit union, a high-interest rate goes hand-in-hand with a poor credit score.
Tips for Improving Your Credit Score
The best way to secure funding now and in the future is to improve your credit score. Here are three key areas of focus to keep in mind.
Dispute Negative Items
Negative items are debts that have gone to collections. Organizations like LVNV Funding purchase debts from other companies and can make a borrower’s life difficult ( learn more about LVNV Funding).
By disputing negative items, you can have them removed from your credit report and improve your score quickly.
Improve Your Debt Ratio
Another way to boost your credit score is to boost your debt ratio. This number is based on what you’re approved to borrow versus what you use. By paying down what you owe or getting approved to borrow more and leaving the excess untouched, you can improve your credit score.
Practice Healthy Money Habits
Learning healthy money habits is a must for future success. Talk to a consultant and make a plan to pay down your debts, stick to a budget, and build some savings. Commit to paying your minimum payments and a little extra each month to start the long road to financial freedom.
Consider using a system like the Debt Snowball or Financial Peace University to help shift your mindset about money and get your finances under control.
Bad Credit Isn’t a Life Sentence
Having bad credit isn’t a life sentence, but it is a problem that needs to be dealt with as soon as possible. Keep monitoring your credit report and set improvement goals. Explore your options for securing a loan and use this experience to plan for a brighter tomorrow.
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