Loans For Bad Credit Online
Finding a loan when you have bad credit can be a challenge. Bad credit can be caused by any number of reasons including financial mismanagement, overspending through store cards or payday loans, unexpected expenses such as medical bills, or losing your job.
Three Main Bureaus - Equifax, TransUnion and Experian
The three main credit bureaus are:
- Equifax has over 13,000 employees and is based in Atlanta, Georgia and does business in 25 countries.
- Experian , with over 20,000 employees and is in 44 countries, is located in Costa Mesa, California.
- TransUnion is in 30 countries and is based in Chicago, Illinios.
Check Your Credit For Free
You can check your annual credit report for free, or by going to the three bureaus above, this is the first step to check and see if you can get loans for bad credit online. By checking your free report, you can see what is reporting and if there are any collections, judgements, late payments, credit inquiries, debts that are not yours or high balances that may be not reporting correctly. You have protections provided to you by the Fair Credit Act. Your credit is made up of 5 categories according to them: "payment history (35%), amounts owed (30%), length of history (15%), new (10%) and mix (10%)”.
Types of Credit Scores
Did you know there are several types of credit scores and not just one? In fact, there are at least 10 different types of scoring models, not just one. Your score depends on the type of credit you are applying for. For instance, the score that you may get for free from your bank or credit card is not necessarily the same score that you will have when applying for a mortgage or personal loan or auto loan. There are two types of credit scores, but there are several categories for scores, granted there are 3 main bureaus but there are several categories of scores, from medical, auto, credit card, mortgage, insurance and others.
Hard vs Soft Credit Pulls
When you are looking at obtaining new credit, most people are unaware that you may have an option prior to pulling a hard inquiry on your report. You may be able to pull a soft credit inquiry report, which basically means an inquiry that should not hurt your score, but is just a ‘look’ at your credit profile. You are not allowed to know your score from this, however you may ask for a copy of your consumer report. This report is similar to that of obtaining your free credit report, except the company pulling it may cost them to do this for you. A hard credit inquiry may bring your score down depending on various factors, such as how many times it has been pulled in the past year, or the type of credit pull it is. For instance, a mortgage pull should allow you to shop around to other lenders to see what is the best loan and cost for you, thus it should allow you to pull from other lenders within a 45-day period and not hurt your overall score to our understanding.
Bad vs No Credit vs Good
People ask all the time, what is considered good credit or what are the differences between bad and no credit? Sometimes bad credit can actually be better than having none at all. With bad credit, you might know if there is a chance to improve your overall score or not, whereas no credit is simply just starting fresh. You can attempt to turn bad into good credit, but it can prove to be more difficult to do the same with no credit as there probably isn't anything to improve. It is never too late to get a fresh start on your journey for better scores, but be prudent when doing so. Good scores are right around the corner.
Do You Have A Bad Score?
Unfortunately, in order to build your credit again, you might need to demonstrate that you are able to make payments on a loan. This can be difficult if lenders are unwilling to deal with lower credit scores and if you are lucky enough to obtain a loan then it might not be very favorable. The process can be frustrating when searching for loans.
However, there are some online lenders that offer loans specifically for people with poor credit. Usually, these loans for bad credit online are short-term loans with higher interest rates, as the borrowers tend to be high-risk individuals. They also tend to have more restrictions about how much you can borrow, for how long, and what the money can be used for.
How To Raise Your Score
When you need guidance to raise your credit score, you should check several sources to see what may work and if it makes sense. For instance, if you have bad credit, you might want to consider what is reported first on your report. There might be incorrect items that shouldn’t be there, perhaps someone else with the same name or a Sr or Jr, but does not match your exact name, perhaps your middle name is different or date of birth. The best thing to do is to contact the creditor that is reporting this issue, request that they provide you a copy of a signed document to prove that it is you. Confirm details such as social security number, date of birth, address, or other items. You might even want to consider getting advice from an attorney first or repair company as they are professionals that may be able to help. At times, if you are obtaining a mortgage, the mortgage broker may be able to help during the loan process if you have proper documentation regarding items to your credit as well. Make sure to confirm all tradelines are correct first.
You might want to either provide them a reasonable explanation of the ‘why’ for your derogatory if it is yours. If you are looking to resolve your debt and want the odds in your favor of getting a higher score, then see if the creditor is willing to either correct the reporting if it is an error as they will only report truthfully. If you are looking to pay the dent, delete the reporting then request to have it deleted as a part of the settlement agreement as this might prove to help you out. If you fail to get them to delete the ill reporting, then you might still end up with the debt on your report and it may not improve your score as much as you would like.
How To Obtain Loans For Bad Credit
You may be able to obtain a loan, but the interest rate might not be ideal for you. Make sure to know the rule of 72 when doing so. This is the general rule of them for compounding interest. For instance, if you have a credit card at 9% interest rate, then every 8 years your balance will double. It can also be done in reverse for investments, in other words, if you invested a certain amount of money at 9% interest, it would take 8 years before it doubled, as 9 x 8 = 72. The same would be said for a 7.2 rate of return, it would double in 10 years (7.2x10=72)
Know what simple interest is vs interest. Simple interest is the principal loan amount times a certain percentage. Compounded interest can be, for instance, today's interest, then you take that 1 day int. amount and calculate it for that day, and then do the next and so forth. Other words, the principal amount and the accumulation period.
In addition, high-interest loans for bad credit, you might also qualify to obtain a secured loan. These unique loans might have a lower interest rate but will be secured against an asset, like your car or a mutual fund, for example. This gives the lender an added layer of protection if you fail to make repayments. Guarantor loans require somebody else, usually a family member, to commit to paying the loan if you are unable to. These kinds of loans for bad credit can be an effective way of rebuilding your scores and preparing for the home buying process.
Purchase A Home With Bad Credit?
It depends on your definition of bad credit, bad credit for one person might be good credit for another. However, with the lender they might not have a drop down menu for opinion related questions, but rather they can base it off of your score. Other factors such as debt-to-income ratio (DTI) and reserves may also play a factor in your loan consideration.
FHA loans may be of interest to some that may think that they need to improve on credit. Read further on FHA FAQs regarding FHA financing for home loans. The general rule is, your DTI ratio has more flexibility generally than other types of loans, while being able to put very little money down. There may be fees for FHA loans, but considering what the program does for potential homeowners it might just be well worth it for your situation.
How To Improve Your Bad Scores
The golden question, how to improve your bad credit to good credit, this depends on one person's situation vs another as no two situations are alike for the most part. Your situation might call for letters to be written and disputes, or perhaps even negotiations. You might also want to consider not disputing while attempting to obtain a loan as some mortgage lenders will not lend to credit that is currently being disputed. This is the importance of taking action on any credit mistakes sooner than later.
Whatever the reason for bad scores, you should try and improve your credit, especially if you are planning to buy a home soon and you are looking at mortgage options.
If you are about to purchase a home on the market and you are concerned that poor credit will impact your chances of getting a mortgage, even if it is a jumbo loan, get in touch with Mortgage Quote today. We might be able to guide you and help find a lender that might meet your needs and goals. Get started and apply here for a home loan with MortgageQuote.com to buy or refinance your dream home.