How to Get Prequalified With Bad Credit

Your credit score is the main tool with which creditors decide whether you are a low- or high-risk client. Your score can range from 300 to 850. According to the three major credit reporting agencies, bad credit exists when your score is below 550. If you have bad credit, you can still attempt to get prequalified for a loan and can begin to build your credit into an acceptable or even good credit score.

Instructions

1

Order your credit report from the three major credit reporting agencies: TransUnion, Equifax and Experian. All three have credit information on you and will give it to any creditor that pulls your report when considering you for prequalification. Look for mistakes on your reports that can be fixed to raise your score. Each report will have contact information to call or write to that agency to correct any issues. If you have questions about any of the information on your credit report, you have the right to ask that it be removed based on the Fair Credit Reporting Act.

2

Contact your preferred lenders or creditors to determine if they offer programs for people with bad credit. For example, if you want to prequalify for a mortgage, contact a mortgage company or bank and ask how you can prequalify with less than good credit. The bank will inform you of its policies and help direct you through the process, if it offers one.

3

Save your money and start a savings account or open a CD (certificate of deposit) with a small bank and get a loan secured with that savings account or CD. Many small banking institutions will help build your credit with this small loan (usually $1,000 to $5,000) that reports to the credit reporting agencies monthly.

Since your loan is secured by your savings account or CD, there is no real risk to the bank because if you do not pay the loan as required, it will pull the payment from your secured savings account or CD. If you do pay the loan as written, then you are building your credit for a prequalification with that bank and other financial institutions. These potential creditors recognize that you are in a building mode and that you are making an effort to improve your credit standing, which is a positive attribute when deciding whether prequalify you.

4

Apply for a secured credit card. Secured credit cards are similar to prepaid credit cards, but they report to the credit reporting agencies. If you have one or several secured credit cards being reported on your credit report, these are positive signs that cannot only raise your credit score, but get you prequalified as well.

5

Write letters to explain your bad credit; attach them to your application for prequalification. These letters help explain your situation and give the creditor an overall picture of the circumstances behind your bad credit.