7 Tips for Taking Out a Loan With No or Bad Credit

Any time you’re taking out a loan, numbers matter. This includes your credit score.

If yours is sub-par or non-existent, talking to lenders might seem like an intimidating endeavor. After all, most will consider your score as they review your application. 

Still, there are plenty of ways you can assure your creditworthiness, even as you work to get your numbers where they need to be. Today, we’re sharing seven tips to keep in mind as you apply for a loan with bad credit or no credit at all!

1. Understand Your Credit Rating

The first step to securing bank loans with bad credit? Understand what your credit rating is really like.

Before you write off your rating as terrible, take the time to run a report with the three main credit reporting agencies. These include Equifax, TransUnion, and Experian.

While you might think it’s is super low due to late or missed payments, you might be surprised when you see the results. You’re allowed to pull one free credit report each year, so perform your checks before applying for a loan. This way, you know where you really stand.

As you go through the reports line-by-line, check for any errors or inaccuracies. Sometimes, even the simplest oversight can cause your rating to dip. Report any issues to the credit reporting agency so they can make the proper adjustments. 

While you won’t be able to see your actual credit score in these reports, it will give you a solid idea of any strikes against your credit so you can take action. 

2. Complete Your Credit Profile

When a lender pulls your credit report, they’re doing more than assessing your rating. They’re also looking to learn as much about your credit history as possible.

To this end, it pays to flesh out your report with helpful background information. If yours is devoid of key details, it’s considered a thin file (or a limited credit file) and immediately sends up a red flag.

Remember: A lender needs to feel confident that you will be trustworthy with the funds allocated to you. If there’s nothing in your report that they can reference, your application could be denied.

What does this mean for someone who doesn’t have a credit history at all?

In this case, take advantage of any opportunity you have to demonstrate that you have a history of complete, on-time payments. For instance, if you have been appropriately managing basic household bills (e.g. water, utilities) agencies such as Experian will allow you to track those payments online. This way, you’ll boost your credit rating with every payment you make. 

In addition, you can also find several platforms that allow you to upload your timely rent payments to your credit reports. Especially when you’re starting from scratch, everything helps.

3. Address Your Outstanding Collections

When you repeatedly fail to pay a bill, most debtors will eventually send your invoice to the collections agency.

Not only are the constant collection calls unsettling, but they can also negatively impact your credit score. That’s why it’s so important to pay those accounts off as soon as possible.

While closing them out altogether can help relieve your debt burden, it’s important to understand that this simple action alone will not cause your credit rating to soar. In fact, as long as a collection account is listed on your credit report, it can negatively impact your score. Over time, you’ll notice an improvement, though it won’t be immediate.

Still, it’s a smart practice that can help bolster your credit enough to earn you a second look during the loan application process.

4. Avoid Quick Money Options

When you’re desperate, you’re bound to try any debt help option that offers you a way out of the chaos you’re in. Still, it pays to be discerning.

There are many reputable resources, including debt consolidation solutions, designed to help you secure more favorable rates and terms for your loans. Then, there are get-rich-quick schemes that prey on an already-vulnerable population. 

Be wary of offers that promise a massive payout with minimal involvement. Ofen, these include hidden or tacked-on fees. According to research, the annual percentage rate (APR) for a payday loan with a fee of $15 per $100 is around 400%!

5. Consider an Alternate Lender

Running into multiple roadblocks at big, commercial banks? If so, it’s time to consider using an alternate lender, such as your local credit union or an online resource. 

Large, chain banks have ultra-high lending standards, mostly because they have such an expensive and widescale enterprise at stake. On the other hand, credit unions and most online lenders are able to operate more flexibly.

Owned by members rather than stockholders, credit unions are some of the most lenient lending institutions. They’re also some of the most personal. If your score isn’t currently where it needs to be, you can work one-on-one with a team member to develop a roadmap for the future.

6. Add a Cosigner

Still, finding it difficult to secure a loan with your bad credit?

You might have a friend or family member with a more solid credit standing. If so, ask them to act as a cosigner on your application. 

By signing on to your loan, this person agrees to assume your debt obligation in the event of your passing. As such, it’s a responsibility that no one should take lightly.

The payoff? Most lenders will be more agreeable to lending with you, as you’ve already proven that you’re financially savvy and future-focused.

7. Consider Debt Resolution

Are you falling behind on payments or finding it difficult to keep up with recurring, monthly payments? If so, debt resolution can help alleviate these challenges. 

With this approach, you’ll work with a debt resolution specialist to communicate with each of your creditors and work out a solution for resolution. This means paying back your creditors for less than the amount you owe. The debt resolution company extends credit while you make a single monthly payment into an FDIC-insured dedicated account and manages the entire process for you to resolve your debt.

Once you’ve amassed enough into your dedicated account the debt resolution specialist will pay off your balance with the creditor for the amount and terms agreed upon by you and the creditor, which is usually for much less than the balance owed. 

Taking Out a Loan, the Easy Way

If you’re considering taking out a loan, you don’t have to let bad credit or no credit get in your way.

Even if your credit rating isn’t where it needs to be, you can still secure access to the funds you need. By following these six steps above, you’ll know where to go, who to talk to, and how to proceed.

Along the way, we’d love to help.

We match our clients with expert debt consolidation solutions tailored to their unique needs. These solutions can help you obtain more favorable loan terms, on your terms. Contact us today to learn more.

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