Can I Get a Loan if My Credit is REALLY Bad?

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shutterstock_121865833Oh, credit scores. For some they are a source of infinite possibilities, but for many others they serve as a major roadblock on the path to financial goals such as purchasing a car or a home. While it’s true that bad credit can make it difficult to get a loan, there are strategies you can employ to make the process a little bit easier.

Probably the first and most important thing to do when trying to get a loan with a less-than-desirable credit score is to stop beating yourself up about whatever that score is. Many, many people have faced financial hardships, especially since the onset of the recession in 2008. So whatever your financial circumstances are at the moment, remember that your credit score isn’t you. It’s not a commentary on your worth as a person. And furthermore, credit scores aren’t forever. In just a few short years, with the right moves, you can substantially change your credit profile. There is hope!

[Free Resource: Check your free credit report and score]

Now that that’s out of the way, let’s focus on the here and now. If you find yourself in need of a loan when your credit score isn’t looking its finest, try one or a combination of the following tips to make yourself more attractive to lenders:

Shy away from corporate banks

Large, national banks tend to give the cold shoulder to those with less than stellar credit, and usually there’s little you can do to change their minds. Consider applying for a loan at a small, community bank or credit union. These lending institutions are more flexible and more willing to work with customers whose credit scores don’t necessarily reflect their usual financial habits.

Try to secure a co-signer

While it’s true that smaller banks and credit unions are more likely to take on customers with low credit scores, you’ll bolster your chances of securing a loan if you can convince a friend or family member with good credit to co-sign your loan. This proves to your prospective lender that a credit-worthy acquaintance trusts you enough to vouch for your financial habits, which, in turn, gives the lender faith in the likelihood that you’ll repay the loan

Save up a substantial down-payment

Customers with high credit scores can often skate by with little or no down-payment on their loans, but borrowers with insufficient credit often find that saving up a good-sized down payment for a car or house makes lenders more likely to provide them with loans. The effect of a large down-payment is two-fold: for one, it proves to the lender that you have the discipline to put money aside, which indicates that you’ll also have the discipline to repay the loan. Secondly, it reduces the total amount of money that the lender will have to dole out, thereby reducing the “skin” it has in the game. Consider coming to the table with at least twenty percent of the total purchase price of the item to make yourself as attractive a loan candidate as possible.

While it’s certainly more difficult to obtain a loan if your credit is bad, don’t despair – it can be done! So while you’re working hard to rebuild your credit, consider using one of the strategies above to put your financial goals in reach.

[Free Resource: Check your free credit report and score]

Remember, the worst a lender (or anyone else!) can say is no.