Borrow Money Even If You Don’t Have Good Credit
Building credit is an important part of your personal finance. If you don’t have a credit history, it’s hard to get a loan, a credit card, or even an apartment. People with no credit history, or low credit scores, end up paying much higher interest rates when they need to borrow money. This can mean higher monthly credit card payments, more expensive car insurance premiums, or even losing out on a job opportunity. Whether you have no credit history or are recovering from a low credit score, learn how to build your credit and gain access to more favorable borrowing terms.
What Is a Credit Score and How Is It Calculated?
Let’s start with the basics: what is a credit score? In basic terms, a credit score measures how responsible you are when borrowing money and paying bills. Lenders, such as banks and credit card companies, use credit scores to evaluate the risk of lending money to consumers. Before credit scores, credit was evaluated using credit reports from credit bureaus. During the late 1950s, banks started using computerized credit scoring. Credit scores give potential lenders a broader view of your credit history than do other data sources, such as a bank's own customer data. A credit report also includes information on where you live, and whether you've been sued or arrested, or have filed for bankruptcy.
The most often-used credit scores are the ones issued by FICO. The FICO score was first introduced in 1989 by FICO, then called Fair, Isaac, and Company. The FICO credit scoring model operates on a range, with 300 being the lowest score possible and 850 being the highest. In case you are curious, the average FICO score in the U.S. is 704.
Credit scores are calculated using personal information in your credit report: your name, current and previous addresses, social security number, employment history, credit accounts, payment history and balance information for each account, and applications for new credit. With this personal information, FICO scores use five specific factors to calculate your credit score:
Since credit scores are based on information in your credit reports, a higher score is a sign of healthy credit. At the end of every month, your credit scores are recalculated and reported to credit bureaus to reflect any changes. Your scores could go up, down, or stay the same every month.
Why Is Credit Core Important?
Get better rates on car insurance:
Some insurance companies may use your credit scores to make decisions when you apply for coverage. Auto insurance carriers can use your credit reports to help decide whether to approve your application and how much to charge you.
Note: Some states—including California, Hawaii, Washington, Massachusetts and Michigan—strictly limit or entirely prohibit insurance companies' use of credit information in determining auto insurance rates. In these states, your credit score won't affect your insurance rates no matter how good or bad it is.
Get approved for higher credit limits:
Good credit may also help you get loans for a larger amount. Since a good credit score may signal to lenders that you are a good credit risk, they may be willing to lend you more money.
Save on other types of insurance:
in a similar way to auto insurance, your credit score may also be a factor for home insurance, renters insurance, and other types of insurance. Insurance companies may want the same information that other lenders look for: how likely are you to pay your premiums on time. That could include your history of on-time bill payments as well as how much debt you owe. What insurance companies learn about your credit may help them determine how much you will pay in premiums.
Give you more housing options:
Where you live can have a big impact on your quality of life. Good credit can help you have more housing options because landlords will typically check your credit history when you apply to rent an apartment. When choosing between tenants, particularly in a competitive market, a landlord is more likely to select the tenant with a better credit score.
Qualify for lower credit card interest rates:
When you apply for a credit card, the card issuer will likely check your credit. If you are approved, a good credit score may make you eligible for a lower annual percentage rate (APR). The CFPB states that good credit may be helpful when it comes to determining your APR since “credit card companies typically offer their best rates to customers who have the highest credit scores.”
Get approved for utility services more easily:
Did you know your credit score may be considered when you set up accounts for utilities, such as gas, electricity or high-speed internet service? According to the Federal Trade Commission, “Getting utility services…has a lot to do with your credit history. The better your credit history, the easier it will be for you to get services.” Also, good credit can mean that the utility company might not require a security deposit.
The bottom line is: good credit makes it much easier and often cheaper to borrow money, and building your credit is key to qualifying for lower interest rates, higher borrowing costs, and more housing options.
But what happens when you need money urgently?
How To Borrow Money With Bad Credit
If your credit score is less than 670, you may feel like your score is a roadblock to getting access to good financial products. Low credit scores are risky business for lenders and borrowers are punished for it with high-interest rates and less than favorable repayment terms.
Finding an affordable bad credit loan can be a challenge. The loan could come from your regular bank, but more affordable interest rates and flexible qualifying requirements may be found with these options:
Family or friends
Find a co-signer
Borrow from the equity in your home
Secured vs unsecured loans
Negotiate an agreement with your bank
If you find yourself in a financial emergency, there are alternatives to bad credit loans that can help you borrow cash on more favorable terms.
Bad Credit Loan Alternative: Collateral Loan
At VerdeLoans, our mission is to make borrowing money easy, even if you have bad credit. As an alternative to high-interest rate options such as payday loans or cash advances, we are committed to making cash available on reasonable terms. If you feel trapped and limited in your options due to bad credit, we encourage you to learn more about VerdeLoans. We do not check your credit. Instead, we use your collateral to lend you anywhere from $5 to $50,000, in a safe and secure way. Asset-based lending is extremely useful for people with bad credit who come upon unexpected expenses, as it can generate cash quickly without the need for lengthy loan applications. If you have jewelry, luxury handbags, electronics, or other valuable assets, you can use them as collateral to borrow money with VerdeLoans. Simply take a photo of the item you want to borrow against and submit it in our 30-second form. We then send you an estimate of how much you can borrow. If you agree to the estimate, we send a courier to pick up the item from you at no cost. Money is wired to your account and all documents are handled online. Our couriers are fast and discrete, so you don’t need to worry about feeling embarrassed. When you are ready to pay back your loan, your item will be returned to you in the same safe and secure way. Learn more about VerdeLoans, or submit a photo of your item for an estimate today!