If you are in need of taking out a loan, but you are convinced it is not possible due to a low credit score, there is hope. A low credit score doesn’t actually have to mean that you can’t secure a loan, especially if you seek out the best loans even if you have bad credit.
There are certain steps that you can take which will make you an ideal candidate to lenders, even if you do not have a pristine financial past. These steps will set you up for success, and with some time and effort you can make sure that credit score does not further impact your financial future.
Address What You Can About Your Credit
If you know you are going into the loan process with a low credit score, the best way to get a good loan is to address what you can about your credit beforehand. There are actually a number of things you can do to bring that score up, like petitioning to have old penalties removed, consolidating some debts into one sum, and paying off what you can. Sometimes opening a new credit card and keeping the balance paid off can also help [1]. If you start this process a month or so before you plan to apply for loans, you will be in good shape.
Ready Your Finances
Another piece of prep work that you can really benefit from is getting your finances all organized before you start the application process. Most potential lenders are going to want to see that you will have the means to pay back your loan on time, and they will be looking at things like steady paychecks and employment. If you aren’t already receiving a steady stream of income, work on that first. And make sure to have all of your paperwork in hand and ready to submit. You will need this anyway for the application process, so it makes sense to get yourself organized now.
Work Toward Prequalification
Prequalification can be a great tool for helping you get approved for the best loan. You might think that a low credit score may mean you won’t be applicable for prequalification, but that doesn’t have to be the case. Prequalification is when a soft credit pull is done on your score, and lenders give a brief and not thorough check through your finances [2]. Because this process does not go deep, it is possible to get preapproval even if some aspects of your financials are not ideal. Follow steps one and two in this guide and you will have the best chance of making prequalification. And the good news is prequalification is going to make it much more likely that you will get that official approval on a loan application.
Consider Using a Co-Borrower
If you are still concerned that your low credit score will mean you can’t get approved for a loan there is still more you can do. You might consider applying with a co-borrower or co-signer. This is when a second party, ideally with strong financials and a good credit score, agrees to apply for the loan with you as a sort of partner [3]. This individual is agreeing to the lender to take on the penalties or debt if you end up unable to pay back the sum you borrowed. Due to this, you need to make sure to do this with someone you trust, and make sure you are able to hold up your end of the deal, or they may face some steep penalties that you don’t want to put on someone else’s shoulders.
Plan To Make Payments on Time
Finally, if you want to ensure that you are able to secure a good loan even with a low credit score, make sure you have a plan in place on how you are going to pay back what you borrow. Know how much you can afford to put toward the debt each month without straining yourself too much. Having this plan to show to possible lenders will go a long way to proving that you are capable and ready to receive the loan. Even if your financial past is less than ideal, lenders are looking for potential borrowers who will act responsibly in the future and whom they can trust.
Taking out a loan can be a perfect way to get toward a better financial future. And what a shame it would be if a low credit score or something from your past made this path impossible. Fortunately, it does not have to be that way. Taking some time in advance to put together a solid plan will help you get approved for the loan you seek, even if your credit score is not possible. It is the sign of a responsible individual that you are doing your research now to put yourself in the best position possible for this process.
Sources:
- 4 Ways to Boost Your Credit Score Fast (cnbc.com)
- How To Prequalify For A Personal Loan – Forbes Advisor
- What You Need To Know As A Co-Signer – Forbes Advisor
If you are in need of taking out a loan, but you are convinced it is not possible due to a low credit score, there is hope. A low credit score doesn’t actually have to mean that you can’t secure a loan, especially if you seek out the best loans even if you have bad credit.
There are certain steps that you can take which will make you an ideal candidate to lenders, even if you do not have a pristine financial past. These steps will set you up for success, and with some time and effort you can make sure that credit score does not further impact your financial future.
Address What You Can About Your Credit
If you know you are going into the loan process with a low credit score, the best way to get a good loan is to address what you can about your credit beforehand. There are actually a number of things you can do to bring that score up, like petitioning to have old penalties removed, consolidating some debts into one sum, and paying off what you can. Sometimes opening a new credit card and keeping the balance paid off can also help [1]. If you start this process a month or so before you plan to apply for loans, you will be in good shape.
Ready Your Finances
Another piece of prep work that you can really benefit from is getting your finances all organized before you start the application process. Most potential lenders are going to want to see that you will have the means to pay back your loan on time, and they will be looking at things like steady paychecks and employment. If you aren’t already receiving a steady stream of income, work on that first. And make sure to have all of your paperwork in hand and ready to submit. You will need this anyway for the application process, so it makes sense to get yourself organized now.
Work Toward Prequalification
Prequalification can be a great tool for helping you get approved for the best loan. You might think that a low credit score may mean you won’t be applicable for prequalification, but that doesn’t have to be the case. Prequalification is when a soft credit pull is done on your score, and lenders give a brief and not thorough check through your finances [2]. Because this process does not go deep, it is possible to get preapproval even if some aspects of your financials are not ideal. Follow steps one and two in this guide and you will have the best chance of making prequalification. And the good news is prequalification is going to make it much more likely that you will get that official approval on a loan application.
Consider Using a Co-Borrower
If you are still concerned that your low credit score will mean you can’t get approved for a loan there is still more you can do. You might consider applying with a co-borrower or co-signer. This is when a second party, ideally with strong financials and a good credit score, agrees to apply for the loan with you as a sort of partner [3]. This individual is agreeing to the lender to take on the penalties or debt if you end up unable to pay back the sum you borrowed. Due to this, you need to make sure to do this with someone you trust, and make sure you are able to hold up your end of the deal, or they may face some steep penalties that you don’t want to put on someone else’s shoulders.
Plan To Make Payments on Time
Finally, if you want to ensure that you are able to secure a good loan even with a low credit score, make sure you have a plan in place on how you are going to pay back what you borrow. Know how much you can afford to put toward the debt each month without straining yourself too much. Having this plan to show to possible lenders will go a long way to proving that you are capable and ready to receive the loan. Even if your financial past is less than ideal, lenders are looking for potential borrowers who will act responsibly in the future and whom they can trust.
Taking out a loan can be a perfect way to get toward a better financial future. And what a shame it would be if a low credit score or something from your past made this path impossible. Fortunately, it does not have to be that way. Taking some time in advance to put together a solid plan will help you get approved for the loan you seek, even if your credit score is not possible. It is the sign of a responsible individual that you are doing your research now to put yourself in the best position possible for this process.