7 Tips for Borrowing with a Poor Credit History

Running into financial difficulties in the past can seriously limit your lending options. Even if you have made steps to improve your situation and are easily managing your money well now, a poor credit history can get in the way of you being accepted for a credit card, loan, or other credit agreement. Whether you are looking to get a credit card for emergencies, want to purchase a car on finance, or take out a loan for a large purchase, there’s nothing more frustrating than being rejected on the basis of credit history that you’ve managed to turn around. The good news is that there are several alternative options available that you might want to consider. Here are some ideas that you may find useful.

#1. Improve Your Credit Score:

If it is not a financial emergency, then the best option is to work on improving your credit score, so that it’s more likely you will be accepted for credit in the future. Whilst certain things will take a while to be removed completely from your credit record, such as missed and late payments or defaults, making clear steps to improve your credit, and demonstrating a clear pattern or improvements to lenders, can boost your chances of being accepted for credit in the future.

#2. Try a Credit Union:

If you need a loan in an emergency, a credit union can be a great alternative compared to a bank or other traditional lender. Credit unions tend to put more emphasis on customer service and often lend depending on your personal circumstances, taking your ability to repay into account, rather than simply looking at your credit history alone. Additionally, credit unions tend to have lower fees, meaning that you could pay less overall when it comes to repaying your loan. And finally, many credit unions will offer programs to help you get back on track with your finances and improve your credit score.

#3. Credit Building Credit Cards:

If you don’t need a large sum of money straight away and want to borrow credit in order to build and improve your credit score over time, a credit building card could be the best option for you. These cards tend to come with a lower credit limit, meaning that they are easier to manage and allow you to make small repayments each month to improve your credit rating. In some cases, you may even be able to get a credit building card with a limit low enough for you to comfortably afford to repay all at once. This way, you have some extra money and are able to rebuild your credit easily without the risk of running into financial trouble again.

#4. No Credit Check Loans:

If you are in urgent need of a loan, then you may benefit from no credit check loan options which are usually available online. However, it’s important to bear in mind that these types of loans are often short-term and many will have very high rates of interest, so it’s crucial that you do plenty of research beforehand, to make sure that you will be able to afford the repayments. If you can, getting a no credit check loan and paying it back on time is a great way to boost your credit score.

#5. Find a Guarantor or Co-Signer:

If you’re struggling to get credit on your own, then it’s a good idea to look into options that allow you to get credit with the help of somebody else. Guarantor loans are a great idea as they allow a trusted friend or relative to vouch for you and say that they will be able to cover payments in the event that you are not. However, you don’t want it to come to this, so make sure that you take out a guarantor loan that you know you will be able to comfortably afford the repayments for without running into difficulty. Not only will this lead to financial stress for yourself, it can also put a strain on your relationship with your guarantor or co-signer. So, make sure that you full discuss all the possibilities and risks before coming to a decision.

#6. Ask Friends and Family:

Instead of going down the traditional routes and borrowing from a bank or other financial institution, you may want to consider asking your friends and family members for help, if you feel that it is appropriate. Most of the time our partners, parents, siblings and friends will prefer to help out if they can, rather than allow you to put yourself in a position where you could be in financial difficulty. And, borrowing from somebody that you know is less risky than borrowing from the bank, as there’s no risk of fees, charges, and court letters if you’re struggling to pay – you can simply talk to them about it instead and change your agreement, and it won’t affect your credit score. However, if you plan to borrow from family and friends it’s important to do it in such a way that preserves your relationship. Come up with a contract for repayments that you can both agree on, and make sure that communication between the two of you is consistently open and honest.

#7. Use Your Home:

Last but not least, if you own your own home then you can tap into its equity in order to borrow, and most of the time your credit score will not be affected. If you own your own home, there are several options to consider – you can put your home down as equity in order to get a separate loan or you may be able to borrow by remortgaging the property. However, bear in mind that this type of loan carries a lot of risk. If you are unable to keep up repayments, your home will be repossessed.

If you have a poor credit history, borrowing money isn’t always easy. However, it is not impossible! These are just some options to consider if you need to borrow money but your credit score is holding you back.