Before you Apply for a Bad Credit Loan..

by : Gregg Pennington

Once you've viewed your credit history report, and you know your credit score, you're more aware of the specific problems you might have trying to get a bad credit loan. If your credit score is quite low, you may still be able to get a loan, but you'll end up paying much higher interest rates for the privilege. Often, the amount of money you can borrow will be significantly lower than if your credit were good. You probably will not be able to borrow tens of thousands of dollars; more likely, only several thousand dollars, depending on a number of factors including your credit score and income level.

You can sometimes increase your chances of getting a loan with bad credit if you're willing to do a little bit of work. When you got a copy of your credit report, you were able to see all of the problems listed on the report that negatively affect your credit score. Chances are that you can have some of those items removed or changed, thereby increasing your FICO score.

Legally, if you dispute an item listed on your credit report, the lender must verify the entry within thirty days, or they are required to remove that item from your credit report. Likewise, if you have items on your credit report which are several years old, you may be able get them automatically removed. Say you have a listing on your credit report which is four years old. It's a revolving store charge account, but that store is no longer in business. If you file a dispute, and no one is around to look up the old records, the lender who owns the debt may be unable to respond to your dispute, so it will automatically be removed. The more negative items you can get removed, the higher your credit score will climb.

Beware, this strategy can also backfire on you. If you dispute something and the company has people available to verify the credit report item, your credit report could be updated with the current date. And sometimes when this happens, it shows as a new credit problem on your credit report. Choose your battles wisely!

Once you've verified that your credit report is accurate, and your credit score is as high as you can get it, then it's time to start looking for banks or finance companies that provide loans for people with bad credit. Keep in mind that you can't always get the full amount that you want. Sometimes you must begin with a smaller loan, perhaps $500. When you demonstrate financial responsibility to the lender, your amount of available credit will increase.

Most lenders who specialize in bad credit loans will allow you to explain your credit history problems. If some of your credit problems are due to circumstances beyond your control- for instance, an emergency medical bill, but all other accounts and bills are paid on time, this information will be considered when reviewing your loan application.

Almost universally, finance companies who provide loans for people with bad credit will charge higher interest rates than traditional lenders. Be prepared to answer some questions about your credit history, and be prepared to pay more in interest and/or loan processing fees. Most people with damaged credit will be able to get a loan, but many of them shouldn't. Make sure you have a legitimate reason for applying for the loan, and take advantage of the opportunity to improve your credit in the process.