People who have bad credit often feel that they might as well not even try to qualify for a loan or a credit card. The Federal Reserve conducted a study in 2014 and 40% of the people polled said that they wanted access to credit but hadn’t applied because they were worried their request wouldn’t be approved.
If you have good credit you will have access to loans and credit cards with good interest rates. If you have bad credit the opposite is true. However, people with bad credit shouldn’t give up because they can get access to loans and credit cards. The rates might not be ideal but it is possible to get qualified.
One of the most important things to know is that no one should be turning to things such as payday loans. The interest rates are sky high and these types of loans are very dangerous. The annual percentage rate can exceed 350% and trap people in a cycle of needing more payday loans to pay off the former one.
Everyone with credit has a FICO score. The three credit bureaus use your credit history to determine your score. What goes into your score includes how long you have had credit, what your payment history is, how much credit you have, how many credit inquiries you have recently had, and if there are derogatory items such as a bankruptcy. This is the range of FICO scores that determine how creditworthy you are:
- Poor: 579 and below
- Fair: 580-669
- Good: 670-739
- Very Good: 740-799
- Excellent: 800 and over
If your FICO score is below 579 the best lenders to turn to are those that will work with people who have bad credit. A great place to turn is credit unions. Credit unions are non-profits that are owned by their members. Unlike banks, credit unions don’t put profit over everything else. They are willing to work with members to offer auto loans, personal loans, and credit cards.
You won’t be offered the interest rates that people with good credit qualify for. It’s important to shop around among lenders and find the best terms you can. The lowest interest rates are usually for personal loans while credit card rates will be higher. In addition to the interest rates, you will want to read the fine print to see if there are any additional fees on the loan.
If you have bad credit and want to build it a great option is getting a secured credit card or secured loan through a bad credit loans company in New Zealand. You give the lender a sum of money, such as $500, and that will be the amount of your loan or the limit on your credit card. As you pay on the loan or credit card every month your credit score will go up as you show responsible use.