How You Can Finally Fix Your Credit Score And Secure A Better Loan

If you live in America and you have ‘bad credit’ the chances are that your credit score is very low. A low credit score (anything below 600 to 640) means that many banks and lending institutions won’t consider you for a loan or credit of any kind. Those that will lend to you reduce their risk by charging you significant interest rates. Read on for some tips on your options and get yourself on the path to improving your credit score.

What are my options?

There are three types of loan that you can consider. These are a peer to peer loan, a unsecured bad credit loan and a secured bad credit loan. For anyone with a credit score sitting around 600 it’s probably worth looking at a peer to peer loan as your best option. Peer to peer lending is typically where an individual loans money through an online platform (in recent times financial institutions are becoming more common in this space too but the principle remains the same). These kind of loans tend to have the lowest interest rates and associated fees of any bad credit loan. A secured bad credit loan is likely to be your next best option because secured loans should offer a lower interest rate. A secured loan is a loan where you put up something you own as security against the loan. This can be savings, a vehicle or home equity. Keep in mind that the lender can take what you put up as security if you do not make your monthly payments. Only take out this kind of loan if you know you can make the monthly payments. The final option is an unsecured bad credit loan. These loans require no security and therefore a lender will be looking for a credit score of at least 640. Since the lender is taking more of a risk with you than if you had a secured loan, the interest rates are likely to be higher. It is important that you can make your monthly payments because otherwise you can damage your credit score even more.

Are there benefits to taking a loan?

If you make the monthly payments on time each month for the duration of the loan and are a responsible borrower, the timely repayment of the loan will go some way to improving your credit score. Each month your lender will submit information to the 3 credit agencies in the US and update them on your repayment status.

Anything else I can do?

Once you have improved your credit score (this takes around 12 months) you should look into zero interest credit cards as a way of consolidating any other debt you have. If you have a credit score that will qualify you for a zero interest credit card you may be able to reduce your monthly balance repayments and get your debt paid off sooner. For every month you pay on time you’ll be improving your credit score even more.