02 Mar How to Overcome the Challenges of a Bad Credit Score.
Living with a bad credit score can present many challenges. First, it can keep you from acquiring major loans such as a car loan, mortgage or a line of credit. Second, when it comes to personal loans for bad credit, you will be charged higher interest rates. Here are some tips to help you fix and overcome the challenges of living with a bad credit score.
What is a Bad Credit Score?
Here is an overview of credit score ratings:
- Bad Credit: 300 – 579 (can also apply for those with new credit)
- Average Credit: 580 – 620
- Good Credit: 621 – 740
- Excellent Credit: 741+
Plan of Action for Bad Credit:
There is only one way to overcome a bad credit score and that is to have a plan of action for paying off debt. Before considering solutions such as a consumer proposal or bankruptcy, there are a few things you can do to get back on track:
- Debt Consolidation: You can try applying for a consolidation or personal loan at a lower interest rate to pay off debt in one payment. You can then deal with a single, lower monthly payment to help pay off debt faster while building up your credit rating.
- Avoid Credit Hunting: The more you apply for credit and loans, the worse your credit score. This is because credit applications generate a “hard inquiry” that goes on your credit record. Too many of these, especially in a short time span, are red flags to creditors that you are desperate for money.
- Pay Off Debt: Avoid paying just the interest rate and focus on paying the minimum payments at least. As you pay down each balance, contribute more money to the next balance so you can pay it off as quickly as possible.
Bad Credit Loans:
If you are in need of more credit with a poor credit score, there are bad credit loans available. Canadians in need of bad credit loans have options other than banks. These companies specialize in assisting those with bad credit scores get access to the funds they need.
Bad credit loans in Canada are an excellent option because:
- They are often guaranteed regardless of your credit score, bankruptcy, delinquent accounts, collections, or consumer proposals.
- Online loans are available for bad credit loans in Canada and they are often willing to lend to high risk borrowers as they have less overhead than brick and mortar lenders.
- Many online loans do not require a credit check.
Benefits of Bad Credit Loans:
Although bad credit loans tend to charge higher interest rates, there are some benefits for you:
- They can help you rebuild your credit score if you are diligent with payments.
- They will usually offer better interest rates than most lenders offer people with bad credit scores.
- You might have a better chance at borrowing a larger amount of money than you would with other types of loans.
Although living with bad credit can make life difficult, these tips will help you start rebuilding your credit for a more stable financial future.