Bad credit is the level of trust businesses have that you’ll repay the money you’ve borrowed. Thus, you can have either good credit or bad credit. So, personal loans for bad credit might not be as easy as most would think. This is what it means to have bad credit.
To answer that, let’s first talk about what exactly bad credit is. Bad credit describes a past failure to keep up with your credit agreement and the inability to get approved for new credit. That means you haven’t paid your past credit obligations back on time or even at all.
All your credit history is collected by credit bureaus and compiled into a credit report. You may have had some accounts sent to a collection agency, charged high balances, had a vehicle repossessed or maybe even filed for bankruptcy. Bad credit usually takes effect when these things happen a few times rather than just once.
All this information in your credit score is used to calculate your credit score. This is a three digit numerical snapshot of your credit history at any given time and ranges from 300 to 850. The lower the score, the worse the credit.
If you are paying attention to all of your finances, you probably have a good idea of whether you have bad credit or not. Once you start missing payments or have credit cards with large balances. If your interest rates have increased, a credit card application turned down or your credit card issuer lowered your credit limit, it’s a sign that you have bad credit.
Fortunately, you can check your credit score to see whether or not you have bad credit. There is no universal cut-off between a good and bad credit score, but you know you have a bad credit score when it’s below 620.
A loan won’t solve all your problems as excessive debt is a symptom of bad financial habits. But when used properly, a good loan can be the tool you need to get a handle on your finances, maybe even find some breathing room in your budget and improve your credit score.
When it comes to getting a loan with really, really bad credit, your options are limited and usually not very good. The loans that do exist are more often than not, payday loans. These are a low amount, short-term, high-interest type loans.
The best option for you is one of 2 things: 1. Apply for debt consolidation or debt rescue, or 2. Tough it out until you don’t need a loan to solve your problems, or 3. Find a loan provider that gives loans to people with bad credit.
With option 1 all your debt will be put together into one amount against something of value that you own. This can be a house or a car. The interest rate is very low and this will give you the breathing space that you need in your finances.
Option 2 is much harder to deal with as you can imagine, which leaves you with option 1 or 3 again.
Option 3 is also a bad idea as these loan providers will hit you hard with interest. Because of your bad credit score, they can charge you up to 30% for just one loan. If this loan is to pay off other loans, it’ll only put you in a worse position than before since the interest alone will hurt you financially.
That then leaves you with option 1. Debt consolidation is the best option.