Having bad credit history can impose limits on a person’s capability to obtain loans. If you’re considered as a high risk borrower, lenders may instantly disapprove your loan application. On the other hand, some lending companies may be willing to extend you a loan but with high rates and fees. This is why consumers are always advised to build and maintain a good credit standing.
Unsecured loans or loans without collateral often require good or excellent credit history. Because of the absence of collateral, you will need proof of your credit worthiness or capability to make repayments. Although there are unsecured loans for bad credit, you can expect that much higher interest rates and fees are imposed on these loans.
Improve Your Credit Score
To increase your chance of getting approved for an unsecured loan, the smartest thing to do is to work on your credit improvement. Before submitting your loan application, get a copy of your personal credit report from the three major credit bureaus.
See if there are any corrections that you can make on your report to pull up your score. If you have outstanding balances with your creditors, pay them off at once. More importantly, be punctual in submitting your payments on your in coming due dates.
If it’s possible for you to wait at least 6 months, you can significantly improve your credit score by a few points. Aside from ensuring approval, you can be in much better position to request for a lower interest rate from a prospective lender.
Another way to build up your credit rating is to get a gas station credit card or a department store card. If you can’t get approved for a standard credit card because of your bad rating, acquiring a gas station card or a department store card can help you rebuild your credit. Unlike credit card issuers, gasoline companies and department stores do not do a credit check when reviewing applications.
You can also apply for a secured credit card which calls for a security deposit. You may need to submit $300 or $500 on your account as security deposit to be able to get approved. When you receive your secured card, use it for important purchases and pay off your balance in full right away. Last but not least, make sure that your secured card issuer will report your payments to the major credit bureaus.
After six months, reorder a copy of your credit report and see if you’ve made progress. When you’re ready to apply for an unsecured loan, take your time to shop around, compare rates and do research about the reputation and track record of the lending company. Before signing up for the loan, see to it that you have carefully read and understood the terms and conditions in your contract. Use your unsecured loan to improve your credit history even further by staying true to your payment schedule.
About the Author
Sandra Thompson is a loan consultant with Unsecured Loans Now and has been providing consumers and business owners with Unsecured Loans since 1989. For years she has helped people with loan and credit problems especially pertaining to Unsecured Personal Loans, Business Loans and Unsecured Credit Cards. Copyright 2009.
