You might find it more challenging to get approved for a loan or a credit card if you have bad or no credit.
But if due to a sudden emergency, like medical expenses or unplanned repairs, you need money as soon as possible, it’s not impossible to get one.
There are some simple actions you can take to increase your chances of borrowing money from a bank or institution – even with poor credit:
Analyze your credit reports
Did you know that 25% of U.S. consumers found mistakes on their credit reports? These errors can deeply hurt your score.
There are three major credit bureaus in the U.S. – Equifax, TransUnion, and Experian.
Check your credit records, and if you find any incorrect information, contact the company that made this mistake and ask them to correct it.
Boost your credit score
If you make at least a bit of effort to improve your credit score, you’ll increase your chances of getting a loan, and you will also get a better APR rate.
What’s a credit score?
It’s a three-digit number that is used to represent a person’s creditworthiness. A credit score measures how likely you’re going to pay your debt.
What’s your credit like?
- 760-850 – Excellent
- 700-759 – Very good
- 660-699 – Fair
- 620-659 – Poor
- Scores under 620 – Extremely poor
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How can you improve your score?
According to Experian, there are some simple measures you can take to help to increase your credit score, such as:
- Never forget to make your payments on time – even if it’s just the minimum amount.
- Don’t close old accounts – if you close an old account, it will increase your credit utilization ratio
- Have a good credit mix
- Try to keep a low debt-to-income ratio, which is the percentage of your income that goes to paying your debt
- Don’t apply to many credit products in a short period of time
Compare the loan offers
You can apply to two types of loans. Unsecured loans, also known as personal loans – they’re mainly based on the person’s creditworthiness without any collaterals; and secured loans, which require a security deposit as guarantee.
It’s essential to learn about all the loan offers before actually applying for one. Check all the terms and conditions and interest rates first.
A good tip is to find a friend or family member to be your cosigner. With that, you will increase your chances of getting approved with a reasonable interest rate.