It is no secret that the economy is not doing too well these days. Both individuals and businesses are hurting. What is worse, if you were one of the unlucky ones caught in the bubble burst of the late 00's, then probably your credit score went down the tube as well. As a result of this global financial mess, qualifying for credit cards is not as easy as it once was. Therefore, those in a hard spot in terms of money are often left with only one option: personal loans. The good news is that having bad credit does not automatically disqualify you from receiving this help.
Defining Bad Credit: What Is a "Bad" Credit Score?
An important fact to cover when it comes to lending these days is the definition of a bad credit score. Often, people get postponed for financing once and they automatically assume that they have "bad" credit. However, it is not that simple.
Most banks and private lenders will look at your FICO credit scores, which is reported by the big three agencies – Trans Union, Equifax, and Experian. FICO is short for the Fair Isaac Corporation. This is the financial agency that first came up with the credit scoring system as we know it in the United States. A FICO score can range anywhere between 330 and 850. The higher your score, the more creditworthy you are to lenders.
Technically speaking, a "bad" credit score is anything below 600. Those who scores range from 601-640 have poor scores, but are generally still able to get loans at a high interest rate. A score from 641-680 is a medium score that will qualify you for most loans. Above 680 is the ideal and above 720 will get you the best rates offered.
How Is a Credit Score Calculated?
There are several different factors that go into the Fair Isaac system of credit calculation. These include:
1) The Length of Your Credit History
2) The Status of Your Accounts and History of Repayment
3) Total Debt
4) Types of Credit Used (Credit Cards, Student Loans, etc.)
5) Amount of New Credit Recently Sought (Inquiries into Your Credit Score)
Among the most important of these is your ability to show consistent, on-time payments to all debts you incur – the status of your accounts and history of repayment. In times of plenty, this is a problem a problem. What hit a lot of people the hardest in the financial bubble bust, however, was that due to lay-offs, balloon interest rates and exorbitant fees, payments that were easy to make became impossible.
If you fall into a trap like this, your low credit score is not only understandable, but workable. In addition, other unforeseen expenses such as medical bills or family emergencies can create the same problems for people in terms of loan payback. If you want to get a personal loan now, as long as you have repaired and can prove your honest intent, then there are options out there.
Getting a Personal Loan with Bad Credit
Your best option for getting the money that you need is to look online towards private lenders who specialize in working with those who have a history of bad credit. Private online lenders can sit down with you and review the circumstances that led to your credit score being where it is and can often help you by offering a lending package that is not only affordable, but will help improve your credit in the long run.