It’s difficult to find yourself in a situation where your bank accounts are bone dry, and your wallet is anorexic. When things like this happen, it’s important to ask yourself what led to this in the first place. Sometimes, it’s an unfortunate series of events that results in an unfavourable economic predicament. Many of us endure hardships at some point in our lives. This is to be expected.
The cyclical nature of abundance and scarcity can be mitigated by careful and methodical planning. Our minds harken back to verses from ancient biblical texts of 7 good years and 7 lean years. When there is abundance, you plan for the periods of scarcity. If you find yourself staring a barrel in the face, with no capital cushion to fall back on, it’s time to evaluate alternative ways and means of managing your current financial predicament.
Let’s Tackle Credit Scores
Over the years, we have noticed that several methods are guaranteed to yield positive results when you are in a bind. First of all, let’s assume that your credit score is not quite what it should be, and this is making it rather unfavourable for you to get a loan to finance an important purchase. If this describes your personal financial situation, you’re in luck.
But before you rush off to the nearest bank or non-bank lender with a bad credit score, it’s important to understand where you fall on the spectrum. There are bad, poor, fair, good, and excellent credit scores on the spectrum. Since 90% of all lenders currently use the FICO system to determine a credit score, you ought to know where your 3-digit number fits on the spectrum. Here is a quick rundown of credit scores so that you have a better idea of what interest rates and repayment terms and conditions you are privy to:
- Bad Credit scores fall below 600
- Poor Credit scores range between 600 and 649
- Fair Credit scores range between 650 and 699
- Good Credit scores range between 700 and 749
- Excellent Credit scores are typically higher than 750
On the FICO scoring system and the VantageScore 3.0 system, credit scores range between 300 on the low end and 850 on the high-end. There are a small number of people in the US who currently have a perfect credit score of 850, but most of us are somewhere in between. You may be wondering how your credit score affects you with lenders.
Simply put: the lower your credit score, the worse your APR, interest-related repayments regimen, etc. Fewer lenders will be willing to deal with people with bad credit scores. The good news is that a quick search reveals many lenders offering bad credit loans. These loans cater to a niche, yet growing market of customers who need to access lines of credit.
Poor Credit is Not the End of the Road
Many banks are reluctant to take on people with poor credit scores, since they may be susceptible to defaulting on their loan repayments. However, there are two things that a credit score does not take into consideration which many non-bank lenders pay attention to: your current income, and the length of your employment. Your credit score may be low through no fault of your own.
You may be a new immigrant to the US, you may recently have graduated from college, you may never have applied for credit, your credit history may be undeveloped, etc. Whatever the reasons for your poor, or bad credit score, the number does not take into account all aspects of your current reality. Sure, a large number of people who have bad credit scores have contributed to them with late payments, missed payments, excessive expenditure, liens, judgments, defaults etc.
Regardless, a bad credit loan is still an option available to you from bank and/or non-bank lenders in the financial markets. The terms may be less favourable than they are for folks who have excellent credit scores, but these personal and business loans may be precisely what you need to tide you through a rough patch. Plus, you can rebuild your credit score by making good on monthly payments with bad credit loans. These practices can help to rebuild and restore your credit, even though many traditional lenders may eschew your application for risk of default.
Tarik Pierce is the founder of InvestorTrip.com and regularly contributes articles to this website.
While living overseas, he uses PureVPN for a low cost VPN service.
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While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.