Credit is a way to determine the security of loaning money to an unknown source. Such as from a bank to an individual. Tracking credit allows the bank to protect themselves from risks which could cost them a great deal in collection fees and loss of resources. Building and maintaining a higher credit score enables a borrower to lock in lower rates, pay a minimum down payment, and enjoy lower associated costs.
With the turbulent market at the beginning of the century, many found themselves with bad credit scores, mounting debt, and were unsure of how to transform their financial situation.
First time buyers are often surprised to discover that a lack of credit is still considered bad credit. Although there are some first time buyer auto loan programs out there, the very thing they have to do to establish credit is almost impossible due to the high fees associated with making a purchase.
Others may have found themselves in a difficult life circumstances that meant they had to go in to debt to provide for their families or cover high medical bills.
Regardless of what put you in the place of having bad credit, there are reasonable and readily available solutions to help you re-establish yourself in the marketplace and as a low risk to lenders.
Where do you start to find out if you have bad credit?
Run a free credit report.
If you are looking to make a large purchase you can have your credit report pulled by the bank from which you are wanting to borrow money. Many online services will allow you to check your credit score without causing it to negatively impact your report. Know your number, know your risk.
If you have bad credit, it’s time to start rebuilding or building your credit history. Credit is changeable. A few mistakes, a foreclosure, bankruptcy, late payments, and suddenly your credit drops so low you may wonder if it will ever make it back to a high score again. Well, after seven years most debt falls off of your record, which enables you to make purchases without your past pulling you down. It’s like you have a new credit report. This is where many first time buyers find themselves. They need to establish themselves in the market, but don’t have the resources to do it.
How do you convince lenders that you are a good borrower if you have bad credit?
First check with credit unions. They often have lower fees and better rates for people with bad credit. You could try a small personal loan or auto loan to establish yourself as a safe risk. This may mean you’re unable to purchase the car of your dreams because the fees may be too high, but if you look for something in your financial reach it will help to establish you as a safe bet.
Co-signers can help if you have bad credit.
It could become necessary to find a co-signer to help you qualify for a loan. This is typically someone with a high credit score that agrees to be surety for the loan if your financial situation changes and you can no longer make the payments. This is a great way to help build credit, but it can be difficult to find someone willing to put their score on the line.
If you find yourself on the wrong side of the credit score, you aren’t alone. Many people have to dig their way out of financial difficulties. While it may be a struggle to ask a friend for help, to purchase an older vehicle, or find a loan with low enough rates, there are solutions. Don’t get discouraged. Keep looking. You are able to build up your credit history and establish yourself as a risk banks want to take.