Legitimate Loan Options for Bad Credit

People who are coping with bad credit know how difficult and frustrating it can be to get a “yes” from a lender. Moreover, the constant rejection can be humiliating and degrading for subprime borrowers. Before you decide on the type of loan that you’d like to apply for online, it’s crucial that you get the facts and research your borrowing options so you can make the best financial decision possible. When shopping for a direct loan, you’ll discover quite a plethora, each with varying terms, conditions and interest rates. These factors will cumulatively determine your total expense during the life of the loan.

By definition, a loan is considered to be “unsecured” when it is not backed by personal property as collateral; rather, it is extended to you by the lender with just your signature on a promissory note to repay the money according to specific terms, rates, and a payment schedule.

Keep in mind, when you need a loan quickly, cash advances and payday loans are certainly convenient and easy to qualify for, but we caution that these loans come at a high cost, with governing laws that vary from state to state. Although they do serve a valid purpose, they should be used sparingly or for emergencies.

The small, short-term loans like the ones we’ve just described, typically range from $100 to $5,000. Larger personal loans may require better credit scores and a proven ability to repay, such as verifiable employment and adequate income. Loan amounts above $10,000 will inevitably require “good” credit.

Having “No Credit” vs. “Bad Credit”

There are considerable differences between having bad credit and the mere lack of an established credit history. Many young people who are just starting out, for example, may not yet have a sufficient credit profile, and this is not the same as earning a lengthy, bad-credit rating resulting from unfortunate circumstances that too many of us face in our lives, or worse — bad decisions, poor debt management, late payments, collections, and excessive spending accounts. Your credit is scored by each credit bureau based on your percieved financial habits and how well you manage credit.

Tip: Credit scores are designed to move quickly in either direction. Good credit can be erased in a matter of months, and bad credit doesn’t have to define you any longer than you allow it to. Start making improvements now. Make timely payments, keep your spending under control, and try to bring your credit untilization down as much as possible. The ideal credit balance is about 30%.

enders typically look at more than just your credit rating. For example, a lender will usually take into consideration additional factors, such as a recent promotion, improving financial outlook, or a solid upward trend in your credit score indicating to them that you might be on much better footing. Theoretically, a person with a newly established credit history, a college student for example, can have a great credit rating on paper — calculated using very limited information from just one or two accounts listed on in their credit history, but that doesn’t make them a good credit risk and lenders know it.

Range of FICO Scores (Table)

Fico Score Rating % Pop What to Expect
300-575 Poor 18% In this range, a credit applicant may experience difficulty obtaining credit approval. Very high interest rates may be imposed and collateral may be required.
576-675 Fair 20% Better chances for approval, but rates may be high.
676-730 Good 23% In the 50th percentile, applicants of this range are likely to get approved for a mortgage or unsecured credit at competitive rates.
731-799 Very Good 20% Very good approval odds.
800-850 Excellent 19% Lenders may be offering you credit before you even ask!

% Pop = Percent of population
Sources: Experian.com and Equifax.com

Your Credit Rights

The Credit Financial Protection Bureau (CFPB) has established consumer protection guidelines that affect your rights to credit report access, disputes, and overall account accuracy.

  • Access: You now have free access to your credit scores through your credit card company. The scores from each credit bureau will be printed on your monthly statement. These will also be available in your personal account on the company’s website. Additionally, if you dispute any information on your credit report, you are entitled to a second free copy from each agency. This will help ensure that the changes, if any, have been made on your report.
  • Disputes: For credit disputes, each credit bureau must have trained staff available to examine all documentation provided by both the consumer and the lender. Their job will be to make a reasoned judgment that considers both sides of the story instead of accepting only the lender’s version of events (a frustrating aspect of the dispute process in the past).
  • Medical Debt: Each agency must wait 180 days before adding medical debt to your credit report. Furthermore, they must remove all medical debt from your report when the insurance company pays it off.


Beware of Loan Scams

Protect yourself and your finances from fake lenders and low-life scammers. Make sure to read up on scam techniques, such as their use of legitimate company names and logos, stolen from real loan companies, in order to hide their illegal operation. Educate yourself about foreclosure fraud, advance fee loan scams, and identity theft, so you’ll be better able to recognize red flags when you see them. You will be able to fend off the bad guys who take advantage of the desperate and vulnerable.