By David Pilley on January 2, 2012
.jpg.aspx) When you get a loan, you need to use it for something worthwhile. A loan for home repairs or college education may be good debt, while a loan for car repairs or a vacation may be bad debt. Loans also come with interest, and your interest rate may be affected by how high or low your credit score is. Having poor credit may hinder your attempt to get a loan, but there are procedures to follow to guarantee that you will get the money you need.
Besides your credit score, lenders look at your bank account. If there’s a sufficient amount of money there, you may be approved for a small loan. There needs to be a positive history with your bank account, so make sure you’ve maintained it for a few months before filling out a loan application. While there is no collateral with a personal loan, lenders still want to see some piece of data indicating that potential debtors will not default. Therefore, a healthy bank account is a must in overcoming a poor credit score. Supplying a copy of your most recent bank statement or a voided check will be required.
Another factor is employment history. If you have a solid history with your employer(s), lenders will also be more likely to overlook bad credit and approve you for a loan. Some additional documents may include a copy of recent pay stubs or a copy of your driver’s license. How often you receive a paycheck will also be a key determinant in the terms of your loan, so supplying a string of consecutive pay stubs is recommended.
Have you been paying bills, such as rent and utilities? This is further evidence you can use to show your responsible nature with money. Just because you have a low credit score, it doesn’t ultimately mean you are bad with money. It’s possible you don’t have a credit card or college loans, and this lack of a credit history is the reason for your subprime score. Using alternative credit, like phone bills and rent, will further support you in your quest for a personal loan.
Finally, you need to do research. Settling for the first choice can end in catastrophe, so shop around for different loan amounts and interest rates. Always check with the Better Business Bureau to see how other customers have fared with a certain lender. You need to make sure you can pay back the loan before you are approved for it. If you receive the loan and pay it back on time, you will be on your way to building up your credit score; just don’t get addicted to purchasing too many loans at one time, or financial trouble will be your new guarantee.
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