Many people make bad credit sound as though it’s the end of the world. Once you have a bad credit record that’s it, no one is ever going to lend you money ever again and you’re doomed to live the rest of your life without a roof over your head or even a car to sleep in. Someone call the coroner because you’re financially dead.
It’s true that bad credit is in no way good. It’s not true that bad credit ruins you forever. It’s even possible to get a mortgage or a car loan with bad credit.
Everyone’s up to their neck in it
Tara Baukus (Bankrate.com) makes a very valid point: these days, you’ll have to look long and hard to find people with completely healthy credit scores. More or less 50% of consumers hover below the prime rate, many of them in the deep subprime region. If all of these people were denied credit, well, credit providers would spend a lot of time with their feet on their desks, twiddling their thumbs.
Loan providers have had no choice but to reassess their approach to lending. They may give lower loans for things like homes and cars and they charge higher interest rates, but they’ve also increased the repayment period and are more willing to work with clients to ensure that financial obligations are met. They’re also more willing to give instant or payday loans.
Basically, credit providers are cautious but they won’t shut out people simply because their credit scores are less than rosy.
Improve your chances
Just because banks and other authorised lenders have relaxed their criteria and don’t discriminate against bad credit, doesn’t mean you can waltz in and demand a loan for hundreds of thousands of dollars. You need to prove that you’re responsible enough to be considered a safe bet. Here are some tips to get that loan:
- Have a sizeable deposit. It’s difficult to save money when you’re preoccupied with mountains of debt, but a deposit shows that you’re committed to the purchase. It also means that the lender doesn’t have to provide as much money, which lowers their risk.
- Visit your bank first. Your bank is aware of your financial situation and knows your financial history. It is more likely to give you a loan than a bank that has no clue who you are. It could also count in your favour if you’ve used your bank’s financial advisory services to help you manage debt. It speaks of financial responsibility.
- Don’t give up. So what if your bank denies your loan application? So what if the next bank also denies it? These days, there are lenders that specialise in securing loans for people with bad credit. You will pay higher interest rates but that’s where your deposit will help. (Note: An article on Telegraph Money warns that too many denied loan applications will further lower your credit record, so make your applications wisely.)
Bad credit is not the end of the world. Yes, it makes securing a long-term loan more difficult, but it doesn’t make it impossible. Don’t forget that instant loans are also available to bail you out of any short-term emergencies – bad credit or not.
- License: Creative Commons image source
Written by Sandy Cosser on behalf of Direct Axis, a personal financial services specialist that offers instant loans, consolidation loans and car loans.