Trying to get a loan if you need one, while having a bad credit score, can seem very difficult. But even though bad credit scores do make things a bit more complicated – it is far from impossible. Getting a grip of how your credit score looks is a good place to start if you’re interested in getting a loan. This will help you to understand the conditions of your situation, and to assess your chances of being approved for a loan.
A low credit score will make it harder for you to get a loan clearance, but there are ways you can improve your credit score in order to increase your chances. There are also ways that you can get a loan despite low credit score, low salary or other aggravating circumstances.
What does lenders look for?
The main goal for a lender is to make sure they will get paid. So before approving you for a loan, they will always do some kind of background check. This is done in order to make sure that you are able to pay the lender back.
Some of the things a lender will look at is your credit score, payment history, work situation, salary and if you have any large amounts of unpaid debt. Payment history accounts for 35% of a loan taker´s credit score and is the most important factor for lenders. Having a good credit score is therefore vital in order to get a loan with favorable terms.
How to improve your credit score
So what if you, for whatever reason, don’t have a good credit score? Well, there are things you can do in order to improve your credit health on your own. Your credit score is calculated using different factors and scoring models that you are able to affect. In order to get the most out of your work, we suggest that you focus on the factor with most impact.
Payment history is one of the key points. You can’t change the past, but putting in an effort now can change your credit score for the better in the long run. Make sure to make all your payments for at least the minimum amount and make them on time. It will also help if you keep the amount of debt you owe low in comparison to your total credit limit. A good limit is to keep it under 30%, since maxed-out credits can be very harmful to your total credit score.
Also, don’t apply for any new credit. Opening or applying for several new credit accounts in a short period of time will make you look like a risk from a lender´s perspective. Keeping old accounts open instead of closing them after you’ve paid them off can however be of help, since that helps to increase your credit history length.
Options for those with a bad credit score
In the long term, the best thing you can do is to improve your credit score in order to get a lone with favorable interest rates. But building up your credit score does take time, and sometimes you might not be able to wait for that long. If that is the case, payday loans are an option for those with low credit score.
Payday loans are short-term unsecured loans, with the basic loan process being a lender providing a loan to be repaid at the borrower’s next payday. Some lenders no not verify income or run credit checks, which means that people with low credit scores are likely to get approved for a loan. The payday loan lenders tend to look at the current situation instead of the history. Payday loans are not available everywhere, but for example you are able to get payday loans in Sweden.
Pros and cons with payday loans
One of the perks with payday loans that seems to appeal to loan takers is the quick process. Application for payday loans is available online, and you can get a loan clearance immediately. Many credit institutions also offer direct payment, where you can expect to get your loan payment within 15 minutes. Even in cases where direct payment isn’t available, you will usually receive the payment into your account on the day of application.
But like with all things, payday loans are not only sunshine and rainbows. Unsecured, short-term loans tend to have higher interest rates than secured loans. Although there is no general answer for how much an unsecured payday loan will cost, you can expect it to be quite pricey. Always make sure to compare lenders and their loan terms with each other, this will help you save money in the long term. Also, never borrow money that you don’t need. Unsecured loans tend to have high interest rates and should only be used as a last resort.