Getting virtually any loan with perfect credit score is an easy and a pleasant process. It does not mean, however, that getting a loan with bad credit should be a painful unproductive venture. While bad credit score limits borrowing abilities, with fewer lenders willing to finance you, it does not mean it is impossible to borrow money with damaged credit. Before looking for loans and making applications it is important to consider few factors.
Do Not Ruin Your Credit by Applying to Many Loans
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Many people make a mistake of applying for loans they most likely would not get in a short amount of time. Besides seeing many rejections you also face a reduction in your credit score. Many people simply do not realize that credit inquiries that are made by lenders stay on their credit reports for up to 2 years, and may lower a credit score by as much as 10%. While it is almost impossible to avoid having an inquiry on your credit report when making a loan application, excessive inquiries may send a signal to other lenders that you are trying to take on more credit than you are able to handle.
Managing Your Credit Is Your Responsibility
Another thing that many people still do not know is that checking your own credit does not hurt your credit score. Pulling your own credit report, besides being a convenience of knowing where you stand, is important to check the accuracy of information listed with credit bureaus. Many people with good credit have a clean credit report mostly due to the fact that they took some effort to check their report and clear it of inaccuracies themselves.
Federal law allows you to pull a copy of your credit report from three major credit reporting agencies for free. Credit scores are not included with this offer, but you can manage to get them free of charge with free trials with Experian, Equifax, and Trans Union. Checking your credit report periodically will help you to stay on top of your credit.
Consider Your Options
The worse your credit is the smaller initial steps you would have to make. If your credit is really bad, then opening a small loan or a credit card with low initial credit limit would be the best thing to start with. Financial advisor would be able to help you to come up with the best starting strategy on your way to get financing and re-establish your credit.
A financial advisor would also help you to plan your income and expenses to better handle your obligations. Most people make a mistake of taking loans out that they cannot afford initially, leaving their credit in ruins shortly after with late payments and defaults. It is always a good idea to take out loans you can afford and to pay off your obligations sooner due to several reasons. First, you may be able to save a good chunk of money on interest rates. Secondly, you would speed up your credit history overhaul. And last, should something unexpected happen, you would have some leeway since you are few payments ahead on a loan.
Overall, with thoughtful planning and some common sense, anybody can get needed financing and build an impeccable credit history with no need to worry about overextending yourself.
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