Tips To Getting Approved For A Bad Credit Loan
Building and managing credit is a huge responsibility. Just ask any one of the thousands of people that have low credit rating scores. These people started out in good faith. They had every intent of making sure their payments would be complete and on time. However, things often happen beyond anyone’s control and those things that happen are events that can often send a good credit rating south for much longer than just the winter.
Make A Strong Financial Stand
If you have a low credit score, make sure you have your financial paperwork in order before approaching a prospective lender. I often tell clients that come to me to help them find financing that a strong financial package can help over come a low credit score. Just today I spoke to a client who actually called the office looking for a $115,000 equipment lease with a 570 credit. Ok, well thats already going to be an up hill battle. I asked him how long has he been in business, less than 6 months he tells me, again another hurdle to over come. But the nail in his coffin was the fact he only had about $800 in his bank accounts. Not even enough to make the first payment IF by some miracle we got him approved. His next question let me know that he really was clueless. He wanted to see if the bank would defer payment for 6 months so he could make enough money to start making the payments. I quickly got off the phone because this was going to be a waste of time. Before you leave a bad impression w/ a prospective lender. Keep these tips in mind before you approach a finance company:
- Banks like to see strong financials when they are dealing w/ a client with bad credit. They need to feel safe that the lease or loan will not end up in collections within the first 3 months
- If you are seeking business financing. Make sure you have a WRITTEN business plan or executive summary for the bank / finance company to review
- Have a list of additional collateral you can use to act as additional security for the lease or loan
Get A Co-Signer
If you just can’t seem to get a lender to say yes, then that’s when you should try to find a co-signer. The best place to look for a co-signer is within the family, or either among friends. You’ll want to trust them just as much as they will want to trust you.
If this individual is backing your loan, they will be privy to the same credit checks as you would be if this were your loan all by itself. Their creditworthiness is based on income, homeownership, credit history, and job security. If you default on any payments, the co-signer will have to pick up the tag. That’s why it’s good to make sure that you have all of your ducks lined up in a row before you put the co-signer’s financial credit rating on the line.
Say what you mean and mean what you say!
To the cosigner, you are saying that you plan to honor the credit contract to the letter they have consigned for. Don’t try to take on too much new credit at first. Take the time to really look at your spending habits. If you have had trouble in the recent past keeping up with your finances, this may not be the best time to put someone else in the cross hairs.
Why Being A Co-Signer Is Very Risky
Being a co-signer is VERY risky. If you are considering co-signing for someone, make sure you understand the risk. I have a family member who co-signed for another family member and now her credit score went from a mid 700’s to now its in the low 500’s because of that family members chronic late payments. My family member who co-signed went to home depot to apply for a credit card to get new windows done on her home. That’s when she found out that she no longer had excellent credit. In fact she didn’t even have ok credit. She has BAD credit and for the first time in 40 years she was declined credit!
Make Repayment A Priority
Make saving a priority! Put aside a little money each month to cover the loan repayment and make it a priority. Protect the person who consigned as if he or she were you. Remember that the reason you needed them in the first place was because you couldn’t qualify on you own merits. That doesn’t make you a bad person in the least. It just means that it may take a while before the system deems you credit worthy and until that happens, make sure you have the co-signer’s best interest at heart.