Poor Credit Score in the USA? See Some of the Best Lenders

Poor Credit Score can be a major hinderance to getting more loans but there is a way out!

A credit score is a three-digit number that shows your credit behaviour. It is what creditors consider to determine your attitude regarding debt repayment. 

A good credit score goes a long way in helping one not just to get loans easily but also to get ones with low-interest rates, as it signals to lenders that you are responsible in terms of your finances.

The best way to maintain a good credit score is to imbibe the habit of paying off your debts wherever they may come from.

Sometimes, people treat some debts with levity because they believe it is too small or insignificant to cause any kind of harm to their credit score but what they might not realize is that any debt that gets on your credit history will affect your credit score.

This is usually how many people end up with poor credit then it becomes really hard for them to get a loan when they absolutely need it.

It might be hard for them to get a loan because most lenders would be skeptical about lending money to someone who doesn’t have a track record of settling their debts.

If for one reason or the other, you fall in this category of people, we are happy to inform you that there are some lenders in the US who offer a particular type of loan that is specifically designed for people with poor credit. This loan is referred to as a Bad Credit loan.

This article will enlighten you on Bad Credit loans, how to get them, and the lenders that offer them in the USA.

What is a Poor Credit Score?

This is a credit score that is considered too low by lenders. It is usually a result of a borrower’s history of not paying their bills on time or at all.

It usually makes it hard for such people to secure a loan as it represents a likelihood that they will fail to make timely payments in the future. There are also concerns that they might default on the loan.

If somehow they are able to secure a loan, such a loan usually comes with a high-interest rate.

Poor Credit Score in the USA

There are major credit bureaus in the USA namely: Equifax, Experian, and TransUnion, and the majority of people in the USA who have ever borrowed money or gotten a credit card will have a credit file with one or more of them.

When we say a credit file, this is a file that contains information such as the amount of money that you owe and your history of settling debts. It is this information that the bureaus use to generate your credit score.

In the USA, the most prevalent credit score is the FICO score which was designed by the Fair Isaac Corporation. It consists of five components:

1. Payment history: This is the part of your FICO score that shows your attitude towards paying your bills. It indicates whether you have always made your payments late or on time. This component maintains 35% of your score.

2. Amount owed: This is a summation of every loan and debt that you owe including student loans, mortgages, auto loans, credit card balances, and so on. It maintains 30% of your score.

3. Length of credit history: This shows how long you’ve been incurring and paying bills. It is usually a plus for you if you have a long credit history. It maintains 15% of your score.

4. Mix of credit types: This is an assortment of the different types of bills and loans that you’ve incurred. It maintains 10% of your FICO score.

5. New Credit: This is any credit that you recently got or applied for, and it maintains the Fina 10% of your FICO score.

Here’s another perspective to credit score.

FICO Scoring Model

Below is a representation of how FICO labels credit scores:

• 300-579: Poor
• 580-669: Fair
• 670-739: Good
• 740-799: Very good
• 800-850: Excellent

How Do I Fix My Poor Credit Score?

If your credit score is poor, there are some steps you can take to improve it and push it to 670 and above. Some of them are:

1. Pay off debts of the past: You should also strive to pay off any debt that you may have in your financial history. This will help to improve your credit score.

2. Design a budget: Come up with a budget that you will stick to no matter what. When you do this, you will be able to monitor how much you are spending and therefore avoid burrowing deeper into debt. 

3. Seek the assistance of credit repair companies: Another proven way to improve your credit score is to work with credit repair companies who will negotiate an arrangement with your creditors and the credit bureau. You will of course have to pay for the company’s services.

4. Begin making payments on time: One of the most efficient ways to improve your credit score in a short time is to begin paying your bills in a timely manner. If you are able to keep this up for at least 6 months, you should start noticing a positive change in your credit score.

What are the Downsides of Having Poor Credit in the USA?

1. You are considered too big of a risk by most lenders: Your poor credit indicates that you don’t pay your bills on time and you probably have some debts in your financial history that you are yet to settle. This leads lenders to believe that it is risky to loan you money, as you may not be able to pay it back within the agreed time frame or that you might even default on the loan.

2. You may lose some career opportunities: If you apply for a job that would require you to handle a lot of finances, some companies, in states where it is allowed, can pull your credit report to see how you’ve handled your own finances in the past, and if it is not impressive, you may not get such a job.

3. It may be hard for you to get an apartment: Most landlords often prefer for a prospective tenant to have a credit score of at least 620 before they can rent an apartment. Therefore, having a poor credit score might make it hard to secure an apartment.

4. It will affect your ability to obtain utilities: Since utility companies usually do a background check before granting an account, having a poor credit score is bound to affect your ability to get utilities.

Types of Bad Credit Loans in the USA

1. Student Loans for Bad Credit: If you are a student in the USA who needs to get a loan to pay for education expenses but don’t have a good credit score, you can always opt for federal student loans which don’t usually require a credit check. You will also enjoy some other benefits that accompany federal loans such as flexible repayment terms and low interest rates.

2. Payday Loans for Bad Credit: This is a type of short-term personal loan that you can quickly get to solve your financial problems. One of the features that makes Payday loans a great option for bad credit loans is that you don’t need to put down collateral before you can get it. However, lenders usually charge higher interest rates compared to some other types of loans.

3. Home Equity Loans for Bad Credit: A home equity loan is a type of secure loan that you can get using the equity that you have in your home. You can get this loan even if you have poor credit because it is a secured loan, i.e. your house will be used as collateral for the loan.

4. Personal Loans for Bad Credit: These are loans that are usually obtained for a specific purpose. They can either be secured or unsecured.

• A secured personal loan would be gotten using a collateral, which would then lower the interest rate that would be charged on them even if you have poor credit.
• An unsecured personal loan doesn’t require collateral but having poor credit would make the lender give out the loan with a high-interest rate.

5. Auto Loans for Bad Credit: This is the type of secured loan that you get by using your car as collateral. Although having poor credit doesn’t prevent you from getting this type of loan, the downside is that you risk losing your car if you fail to make payments on time or if you default on the loan.

How to Get a Loan With Poor Credit

1. Check your credit score: The first step on the road to getting a loan with poor credit is to find out what your credit score is. This information will help you to find out the loans for which you qualify.

2. Strive to improve your credit score: Prior to applying for a loan, strive to improve your credit score using some of the ways that we discussed earlier.

3. Go through a prequalification process: Contact some lenders and see if they offer a prequalification process, which allows you to check if you qualify for some loan packages.

4. Examine your financial capabilities: Before applying, take a thorough look at your earnings and find out how much you can afford to repay. This is the amount that you should apply for, so you don’t end up struggling to pay back the loan.

5. Get a cosigner: When you have poor credit, having a cosigner with a good credit score improves your chances of getting a loan. However, they will be equally responsible for the loan if you default on it.

Best Bad Credit Loan Lenders in the USA

There are numerous bad credit loan lenders in the USA, all with their individual offerings and style of service. Check out some of the best options of Bad Credit Loan lenders in the USA:

Upstart

The first is Upstart. Upstart is a great lending platform that offers a flexible range of loan options, with amounts ranging $1,000 to $5,000. They offer a loan term of three to five years and they are available in every state except West Virginia and Iowa.

Pros                                                                                                                

• The platform offers prequalification with a soft credit check.
• Loans here are sometimes accessible to borrowers with poor credit.

Cons

• There is an origination fee of up to 8% of the loan amount.
• You can’t get a secured loan.
• Their loans are only available for a three to five-year term.

Upgrade

Launched in 2017, this digital platform provides accessible online and mobile credit and banking services. It offers bad credit loans ranging from $1,000 to $50,000, and offers a loan term of two to seven years. Potential borrowers must have a a credit score of at least 580 to qualify for an Upgrade personal loan.

Pros

• Low minimum credit score requirement.
• Loans here can be used debt consolidation.
• Borrowers can borrow up to $50,000.

Cons

• It charges an origination fee between 1.85% and 9.99% of the loan.
• There is a $10 fee if their payment is more than 15 days late.

LendingPoint

This is an online lender based in Atlanta that offers quick funding that ranges from $2,000 to $36,500 to borrowers in every state in the USA, with the exclusion of Nevada and West Virginia. Repayment terms range from 24 to 60 months.

Pros

• Low credit score requirements
• Quick funding

Cons

• High maximum APRs and origination fees.
• Not available in Nevada and West Virginia

Universal Credit

This is an online lending platform that offers personal loans ranging from $1,000 to $50,000. Repayment terms are usually between 36 to 84 months. It offers loans to borrowers with poor credit.

Pros

• You can easily qualify for loans here.
• Quick funding.

Cons

• High APRs
• It charges a 5.25% to 9.99% origination fee on personal loans.

In Conclusion:

While poor credit often discourages most lenders from loaning you money, if you can locate lenders who offer Bad Credit Loans, you should be able to get the funds that you need.