It might feel ironic to get a personal loan to fix a bad credit but many are left without other options. We have outlined some tips that you might find very useful.
Bad credit is all too easy to fall into, and all too hard to get out of. A poor credit rating can bleed into other aspects of your life such as affecting your approval rating when applying for a car loan, additional credit cards, and a household mortgage. Further to affecting other credit applications, a poor rating can even hamper your ability to get a job or an apartment. So you see, it can get pretty bad, not just money-wise.
Now before you go on loathing yourself for getting into this position, it’s important to remember that there is still a way out of a bad credit. Sure, it may take some time to recover and get back into good standing again; you’re going to have to be creative and explore honest and ethical solutions which can correct your financial situation.
This is when personal loans can be very useful. It may seem like the easy way out –and it is, for most people. But, you don’t want to end up like some who got approved for a personal loan only to fall into a deeper financial hole than they were before they got a loan.
So you need to be smart about this type of debt fix and paying it off. To help you out, we have outlined three top tips for minimizing the stain on your credit score by obtaining a personal loan.
1. Double check your credit report
Your credit report may be the last thing you want to see but taking the time to go through it, line by line might just make a difference in the loan selection and application process. So what’s the use of looking at your report other than to remind you of the struggles of paying your credit? Did you know that one in four people are likely to find an error in their report?
This means yours could potentially have information that’s not supposed to be there, may it be a debt you’ve paid a long time ago or worse, a clerical error. So suck it up, go through your credit report and if you find something inaccurate, report it and request for a correction immediately.
2. Limit your applications
As much as you want to go all out and send applications to as many willing loan companies as you can, you need to limit your inquiries as this can affect your credit score negatively. Each application will trigger an inquiry to your credit and lower it. That’s not the right way to fix a bad credit and it totally defeats the purpose of getting one. When you have bad credit, personal loans companies will take more time in your application to ensure you are eligible. So be careful which company you approach.
Only apply at companies that meet your standards and whose standards you meet as well. Take a quick visit to their site and review the requirements. Most lenders will show the minimum credit score they require for you to be eligible for a personal loan. If you do not meet most of their requirements, then you are better off finding another company.
3. Get a family member or friend to co-sign with you
If you really cannot find a good personal loan because of how bad your credit score is then you may need to get someone else to co-sign the loan with you.
This is probably a terrible idea for the co-signer if you’re not going to be able to make payments, however, if they still have faith in you, understand your situation, and are willing to help you out, then this is pretty much your best option.
Make sure you follow through with your payments for the loan otherwise it’s not only your credit score that will be affected. Your relationship with your co-signer will be strained too.
There are more creative ways to get through bad credit with a personal loan but these three are the most feasible. What else did you have in mind? Let us know in the comments.