The banking industry is built on trust.
Customers deposit cash in the bank with the belief that when they need the cash, they can simply walk into the bank and get the money. On their own part, banks lend money to customers and they trust the customers not to default. This act of mutual good faith is one of the foundations on which the banking industry is built.
If you know this already, then you also know that if you have a bad credit history, you will find it difficult to get loans from most banks.
There is nothing surprising about this because it is simple common sense at work. No bank will want to lend money to people who are likely to default. More to the point, no bank will like to give loans to people who have defaulted in the past.
How bad credit history affects you:
If you have bad credit history, it will be better if you do not apply for a personal loan. This is because applying for a loan under the circumstances may damage your credit rating some more. In fact, the best thing for you to do at this point is to try to repair your credit rating first.
Repairing your bad credit:
One thing you should not ever do is try to con a bank into giving you a loan. If you have had credit rating at one bank, other banks are bound to know about it. The good news is that it is possible to get personal loan for bad credit but you need to show evidence that you are in the process of repairing your credit rating. One way to do this is to stop piling up credit card debts. Another option is to start paying off your debts on a consistent basis. Once you have shown some commitment, the banks will notice and this will improve your rating.
Sensible loan options:
Having a bad credit report is not the end of the world. It is possible for people with bad credit to get loans but the approach has to be a bit different. For a start, there would be no point in trying to get a loan from the big and reputable banks. These banks have many customers already. They also have corporate clients so they are not likely to grant personal loan for bad credit. The smart move would be to try smaller banks. The individual with bad credit should have an account and run the account for a while to get some good history with the bank. It will also make sense to apply for a small overdraft first. Once this is promptly paid off, the bank will have more confidence in granting a bigger loan.
Final word:
As stated already, banking is about trust. The customer with bad credit needs to earn the trust of the bank. This is the only way to get a bank loan even with a bad credit rating.
Shelly Evans is a freelance writer and loan consultant. The website https://www.badcreditresources.com offers resources that specialize in providing personal loans for bad credit.
I’m in the process of repairing my credit and I fully agree that you shouldn’t borrow when your credit is bad. You’ll make things even worse by borrowing high interest loans and getting by another month will not feel so great when the next months comes and you find yourself in the same situation, but this time with an added bill to pay for the loan. Cut back, move, sell your car, whatever you got to do just don’t borrow with bad credit and you’ll give yourself a chance to get back on your feet someday.
Borrow with low credit score and you get into a never ending vicious cycle of borrowing more to pay back your initial loan. The more you borrow the more your credit score dips and the more you’ll pay in interest and the poorer you get. It’s a system designed to keep the poor even poorer. It’s tough but I know I need to avoid borrowing to the best that I can. Maybe what I need is a debt counselor to guide me through this rough patch. Things haven’t improved much on my own in the past 12 months anyways. It may be time to get some professional help.
What is your opinion on small secure lines of credit? I’ve heard those are a great way to improve your credit.
I hear radio ads often for companies that claim they can repair your credit. Are they legit? I’ve heard some are scams but some actually do what they claim.
There is a lot of good information here. yes, I’ve heard local banks and credit unions and great starting points when re-establishing your credit.
oh my! I can’t imagine ‘conning’ a bank into a loan. They seem to know everything. But point well taken. Showing a good faith effort to repair your credit goes a long way to achieving it.
So at the end of the day you still have to improve your credit score if you’re going to get a loan or a credit card from the banks. I agree that smaller banks might be a little more accommodating, but they’re not going to go out of their way to give you a loan that you don’t deserve. You just gotta bite the bullet and do it the right way, just improve your credit score over time with timely payments and keeping your balance low.
When it comes to dealings with money, I guess everything’s about trust. The trust currency with banks are your credit score and your current job. If you’ve got good credit, then you pass. If you’ve got a good job, then you pass the next test. Finally if your job pays well, then you’ve earned their trust. It’s just the way things are done and you just have to build trust by following the rules that are already in place. I just need to pay off some of my credit card debt and I think I’ll have pretty good trust built with any bank.