The current economy has made many people who originally didn’t have a poor credit score develop one.

Job layoffs, being forced to take lower paying jobs.  Many people who have never had a problem getting a loan or credit card are suddenly finding themselves being turned down for the first times in their lives.

Poor credit can have far-reaching effects on your life. Credit reports are commonly pulled when an individual applies for a new loan or credit card, but it can also be pulled by an employer during a job application process or by a new landlord.  It’s a ditch that just keeps getting bigger if you don’t try find a way to stop the decline and start improving your credit.

The most common loan that people in this situation apply for is a debt consolidation loan. This type of loan is offered by debt counselors who analyze your current debts and try to negotiate with your creditors to decrease, remove or for a time stop all accruing interest, penalties and fees. Most of these companies work with credit card debt only, so when you are speaking with a company make sure you know if they can work with someone in your particular situation. That means before you contact anyone for help make a list of your debts, how much you owe, and who you owe it to. Analyze it, do you owe mostly credit debt, or is it your family vehicles, student loans etc.  Be aware of your particular needs.

The Challenges of Getting a Bad Credit Loan

It is often far easier to obtain a low when you have good to excellent credit scores. However, everyone needs to apply for a loanat some time. Lenders review credit scores to determine their risk in lending to you. A lower credit score indicates that a person has had trouble with finances, and this is a riskier lending decision.

Altered Loan Terms

Some banks may decline your loan request altogether, but others may approve your loan with altered loan terms. Each lender and bank has different lending guidelines in place, so there is hope for an approval after an initial decline. However, a bank or lender who is willing to lend to you will likely offer you altered loan terms. The altered terms may include a lower loan amount, a higher interest rate, or sometimes a combination of both. It is also common for a bank to require automatic payment withdrawals. These altered loan terms will be in place to reflect the risk they see from your credit history.

Improving Credit Scores

Since most poor credit loans have a high interest rate, its advisable (if you have been making regular payments) to request that the bank refinance your debt. Credit scores will naturally improve over time as payments are made regularly and balances are reduced. Just keep in mind if you are going to ask them to refinance your debt, that the bank will pull your credit and review your payment history with not just them, but ALL your creditors. So its important to be making timely payments on all outstanding debts.

Getting a bad credit loan can be difficult. But it’s not impossible. Make sure that before you apply for a loan you have spoken with a loan officer and know their lending criteria. It won’t help you to apply for a loan to a bank that has an “A” credit only policy. Also keep in mind that each time a lender pulls your credit, your score will drop. You don’t want to have to many unnecessary pulls on your report.