How to Get a Good Loan With Bad Credit

A person is typically classified as having bad credit when their FICO score is 580 or below. This will usually place people in a sticky situation when trying to obtain a good loan, which is a loan that has favorable interest rates, terms and conditions. High interest rates and other unexpected fees are typical for poor credit borrowers, while lower interest rates and lower fees are afforded to good credit borrowers. There are a few steps you can take to help obtain the best loan possible, even with a less-than-desirable credit score.

Instructions

How to Get a Good Loan with Bad Credit

1

Obtain and review your own credit report before you go searching for a loan. This could reveal items reported to your credit file that don't belong to you (such as accounts or late payments that belong to someone else) or incorrect information that is showing on your credit (wrong employment information, a bankruptcy when you have not filed for bankruptcy, or payments reported as late when they have been made on time), which is not uncommon.

2

Fix or clear up whatever you possibly can from your credit report. You might even consider contacting an entity that can help repair your score, if possible. Disputing accounts that do not belong to you or correcting wrong information are common credit report items you can fix. You'll need to contact the credit reporting agency reporting the incorrect information online or by phone. Each credit agency (Equifax, TransUnion and Experian) has its own disputes process. Typically, disputing or correcting items requires you to supply a written description of why you're disputing the item. Supporting documentation, such as a police report you filed if you were a victim of identity theft, might also be required as part of the dispute.

3

Fill out a loan application to determine what you will qualify for with your current or revised credit. If you're applying for a mortgage, then you'll complete the loan application from the lender, bank or mortgage broker. If it's a personal loan or auto loan, then you'll need to complete the application supplied by the dealership, bank or lending institution where you're applying for the loan. Keep in mind that your available borrowing amount could be significantly limited or come with a higher interest rate than you planned.

4

Ask for assistance from a loan officer to discuss ways to increase your chance of getting a good loan. This might include reviewing your history and discussing what has been corrected, borrowing the smallest amount possible for the situation to keep the minimum payments low, or stretching the loan out over a longer period of time.

5

Discuss your credit report with the lender using your own recent copy of your credit report before they pull their own copy of it. This might help alleviate the negative effect that multiple reported credit checks can have on your report.

6

Show proof to the lender of steady income. Remember that you might not get the loan you prefer or the interest rate you'd like if you have switched jobs several times in the past few years.

7

Don't be afraid to shop around to get the best loan possible. You should not feel obligated to settle for one bad-credit loan if there is a possibility of obtaining a better one elsewhere.

8

Read and review thoroughly all of the fine print of a loan you are offered. Be sure to ask for written explanations of terms or conditions about which you are unclear.