Bad Credit Financing
The absolute truth is that is is going to be harder to get financing with bad credit. Having said that, you should know that it is definitely still possible. There are lenders out there who actually specialize in bad credit or subprime loans.
The trick to getting approved is to make yourself as little of a risk as possible. That is really what financing comes down to for lenders, risk assessment. The riskier the loan, the less lenders who will be willing to take it on and the higher your interest rate is going to be.
Making Yourself More Financeable
There are things that you can do to make yourself more likely to get approved for a loan.
Stability is something that a lender wants to see. They want to know that you are not going anywhere and that you are stable in your job or career. If you move around a lot and change your job every six months, you are a bad risk.
If, on the other hand, you have been at your residence and your job for over two years, you begin looking more stable and a better risk, even with bad credit.
Check Your Credit
Just because you have bad credit does not mean that there are not a few easy and quick things that you can do to boost your score. Even a few points can make the difference between getting an approval and a denial.
The biggest thing that you need to do is look for errors. Mistakes on a credit report are all too common. Most items of bad credit, for example, are supposed to be dropped after 7 years. This does not automatically happen though.
Check your credit report by going directly to them or using a free service like Credit Karma. Look for errors on your report and things that should have dropped off. If you find mistakes, you will need to write to the credit bureaus with a dispute. They will then have thirty days to investigate .
Because of the time involved, you should do this at least two months before you intend to apply for credit.
Get A Co-Signer
If all else fails, get someone to sign with you on a loan. This will allow you to piggy back of another persons credit, so to speak.
The loan would be based off of their credit and it would give you a chance to re-establish yourself.
Of course, the obvious drawback here is that it can be hard to find a co-signer. If you were to default on a loan, the creditor could then go after the co-signer and they would be fully liable. This gives a lot of people pause.
What Can Be Financed
You can finance just about anything with bad credit but that does not mean that you should. Since the cost of your loan will be greater, due to the higher interest rates, you should be more careful with your decision.
There are certain things that we need and can not afford to pay cash for many times. The big one that come to mind is an automobile. You need a car and probably do not have 10000 dollars or even 20000 dollars to pay for a cash car.
In this case, it is purely justifiable to make a purchase with bad credit. You need a car after all. What you should do, however, is make as economical of a decision as possible.
Choose the most inexpensive and reliable car that you can. Do not take the opportunity to buy a high mileage luxury car on bad credit. That would leave you with too high of a payment on a vehicle that would soon probably need expensive repairs.
When buying with bad credit for a necessity, be as responsible as possible.
In general, if you do not need something, you should not finance it with bad credit. You should instead put the money that you would be paying for the non needed item towards rebuilding your credit. These include things like boats, 4 wheelers or even electronics such as iPads and apple watches.
You can instead use the money to pay off debt or perhaps get a secured credit card that will go a long way towards getting your credit back on track.
There are of course times when it is reasonable to buy a non necessity with bad credit. These are occasions where they opportunity cost is worth the higher interest on something that you can technically do without.
One thing that comes to mind is an engagement ring. Sometimes the time is right, even when the credit isn’t. In these cases, it is reasonable to take the hit as long as you can afford the payment.
Still, one should use common sense not to overspend. Just because a high credit line is extended does not mean that it should be used or that it is even affordable.
The number of Americans with bad credit, scores under 600, is as much as 20%. With that size of a group, there will always be a group of lenders willing to work with you.
If you need credit for a necessity, it will always be there but one should take care to only use it if it is absolutely needed.
The better choice is to do without and put your resources into getting a credit score into the fair to good credit range. To do this, pay your balances down and simply pay your bills on time. Do this regularly and the good credit will come.