Bad credit sucks.   But most people have a period of time in their lives that their credit is not perfect.   In our credit driven society, those with bad credit know that it is very difficult to live without access to credit.   Fortunately, it is possible to get a loan with bad credit.   Of course, interest rates are higher for those with bad credit because they pose more of a risk to the lender. The more responsibly they handle credit, though, the higher their credit scores will be. Following these tips will help someone with bad credit get a loan and begin to establish a better credit rating.

1. Consider a payday loan – with caution.
Make no mistake payday loans are the devil.  The come with high interest rates and unforgiving fees if you’re late or delinquent.  They are made strictly based on your ability to repay the loan. Because credit reports are generally not checked and positive accounts are not reported to the credit bureau, applying for a payday loan does not have any affect on your credit score unless you fail to repay the loan. Payday loans are useful when quick cash is needed for unexpected situations. The requirements include a steady source of income and a checking account.

2. Work with a broker.
If you are trying to get a mortgage or home improvement loan with bad credit, a broker may be able to match you with a lender that does bad credit loans. Mortgage brokers have relationships with a variety of mortgage lenders and banks and are able to successfully help borrowers with good and bad credit scores get loans that meet their needs. Because brokers have access to the credit terms of many lenders they are able to provide guidance to borrowers who have bad credit.

3. Get a cosigner.
A cosigner is a family member, friend or other acquaintance who has good credit. The cosigner agrees to take responsibility for the loan if you do not make the payments. Because you are listed as a borrower on the loan with the cosigner, timely payments will improve your credit score. A better credit score will make it easier for you to obtain credit without a cosigner.

4. Offer collateral.
Collateral is property that you already own that is used to secure a new loan. Homes are the most common form of collateral. Consumers sometimes use their personal automobile as collateral for personal loans. New companies frequently offer equipment as collateral for business loans. Collateral gives the lender confidence that the loan will be repaid.

5. Apply for a bad credit loan.
There are lenders who only work with people with bad credit. These companies match people with bad credit who need loans with lenders who are willing to ignore past credit problems. These lenders do not request credit reports but they may report positive accounts to the credit bureaus.

6. Increase your credit score.
Higher credit scores make qualifying for loans easier. Credit scores are affected by collection accounts, available credit and debt to credit ratio. If you have several bills that are overdue, paying them off will increase your available credit and increase your score. Paying all outstanding debts may increase your credit score enough for you to qualify for an unsecured loan.

What tips do you have for someone needing to rebuild their credit?  Have you overcome bad credit?  Share your strategies in the comment area!


Originally published Published on: May 8, 2012.  Updated August 11, 2014

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