Credit Myth #9: Getting Approved With Bad Credit Is Possible - Here's How
Credit controls so much of what you can and cannot do in life. Unfortunately, many consumers don’t realize this until it comes time to actually use their scores, such as when they want to buy a home, finance a vehicle or invest in nice furniture and appliances. If you’re part of the 20% of Canadians with a credit score that falls below 600, you may struggle to get a loan—or at least a loan you can afford. That said, though it is true that you will have to work harder to get a loan with reasonable terms and rates, it is not impossible. Below are steps you can take today to work toward a fair loan.
Check Your Score
Before you begin to shop around, check your credit score. Lenders love when people come to them and say, "I know I have bad credit, but....” This gives them the perfect opportunity to conjure up loans with terrible terms and sky-high rates your score may not warrant. Your score may be better than you think, so always check your report before proceeding with the sales process.
Improve Your Credit Health
Once you have a good idea of where you stand credit-wise, assess and write down what you can do to start improving it. If your desired purchase is not an emergency (emergency purchases being vehicle repairs so you can get to and from work, medical expenses or heat for a brutally cold winter), take time to boost your score. Dispute errors on your report, pay down debts, make timely payments from here on out and avoid applying for additional credit until your score is where you want it to be.
Know What Loans Are Available to You
Loans generally fall into one of two categories: secured and unsecured. Secured loans are loans that are backed by some form of collateral, such as a home, vehicle or bank account. Unsecured loans, on the other hand, are not.
Lenders take a big risk when doling out unsecured loans, as there is no guarantee of repayment. For this reason, lenders generally reserve unsecured loans for those with excellent credit, and even then, they come with high-interest rates. With a low credit score, it is unlikely a lender will approve you for an unsecured loan, but if you have sufficient collateral, it may get you approved for a secured loan.
Prove Your Ability To Repay
A person’s credit score is not always an indicator of his or her ability to repay. At the end of the day, lenders just want to know that they’ll get their money back. Offering proof of income in the form of W2s and 1099s, a list of assets, bank statements, proof of work history and proof of other forms of income can go a long way toward helping your case.
LoanConnect connects consumers with the best loans for their scores, circumstances and budget. Shop onlinefor the loan you need today.