Low credit scores can make it difficult or impossible to get approved for credit cards and loans. Often people do not even know their credit score is low until they apply for a loan. Although taking steps to improve your credit score takes time, it is well worth it.
But what if you need to purchase a car to get to work? Do not worry. While you are working on improving your score, there is help available in the form of bad credit loans.
A bad credit loan refers to a loan awarded to people with bad credit history. Most lenders use your credit life information to determine your creditworthiness.
If you have a bad credit history, the lender will likely deny you the loan, and it will be long before you succeed in getting another one.
Fortunately, bad credit loans are there to serve you. Remember, you still need to fix your bad credit history and improve your score. Below are seven ways.
1. Check Your Credit Report
Your credit history is usually stored somewhere in a legally recognized agency. The information is accessible to your lenders, meaning that you, too, can access it. For credit report monitoring request your credit report from the credit report firm and analyze it very carefully.
Focus on the uncleared balances, late payments, and overdue amounts. Getting your credit report will show you exactly where you are in your financial journey. It will pave the way for future planning.
2. Pay All Outstanding Loans
The first step to fixing bad credit is by paying all outstanding bills. There are several ways to pay loans, no matter how bad your financial status is.
Methods such as Snowball and Avalanche help people overwhelmed by loans to make little payments until the last coin is fully paid.
Paying all your outstanding loans will put you in a better position to enjoy better portions of your salary. This way, you will save more and increase your loan limit with credit institutions.
3. Open a New Account
If your previous bank or creditor does not like the idea of awarding you another loan yet, now is the time to shift to another institution.
With a clean record and fully paid loans, you have all the power to qualify for a better loan with another institution.
Consult with experts to find out which institutions offer better policies in terms of interests and then sign up for a new account.
4. Sign up to Cheaper Banking Services and Lower Interest Loans
Insurance services, mortgages, and interests account for a substantial deduction on your payslip. Sometimes they may lead one into a season of financial quagmires.
It would be best if you opted for loans with lower interest rates and insurance plans with lower premiums because you do not want to go back to being in debt once they are cleared.
5. Avoid Signing up for New Accounts
Signing up for a new account could affect your overall credit score for several months. When you create a new account, the lending institution will take some time to read through your credit report and find out who you are.
During this time, your credit score will be put on hold, pending hard inquiry and review. Whenever possible, stay as far away as you can from new accounts, credit cards, and unnecessary loans.
6. Fix Hard Credit Inquiries
A hard credit inquiry might do a lot of damage to your overall credit score. A single inquiry has the potential to drop your credit score significantly, so just imagine having several hard inquiries done at once.
Fortunately, hard inquiries should be made with your consent and permission. If you did not approve any, you could have it removed from and prevent it from being reflected on your credit report.
7. Increase Your Credit Limit
Increased savings, budgeting, and becoming an authorized user could help increase your credit status.
With more money in your account, the lender will have some form of insurance policy that once you are unable to pay, they can deduct the amount from your account with your permission.
Budgeting, on the other hand, helps one spend without wasting money. Becoming an authorized user for an account with a good history also improves your overall credit history.