If you’re one of the millions of Americans with a credit score of 620 or lower, you have a “bad” credit score. Having a bad credit score means you’re going to have a hard time securing loans or other financial allowance. If you wondering about whether your credit is bad or not, it’s good to be aware of your credit report and the decisions that you’ve made in the past. Which might lead to needing credit repair in the future.
What Exactly Is Bad Credit?
Exhibiting bad credit habits like defaulting on credit cards, car loans, and mortgages is a fast way to send your credit score pummeling. To get a loan with good rates, you often need a credit score of at least 680. The lower your credit score is, the worse your rates will be, and the more money will be taken out of your pocket in the long run.
All About Bad Credit Loans
Often when you’re in a sticky situation, some companies try to take advantage of you with unreasonable expectations and extremely high-interest loans. If you ever find yourself getting a bad credit loan, be sure to make all your payments on time and pay it off quickly so it doesn’t affect your credit score.
Secured vs. Unsecured
There are two types of bad credit loans: secured and unsecured. Secured loans often take your possessions such as your home or car as collateral to make sure that you pay the money back. Unsecured loans are more like personal loans, but with strict repayment terms and extremely high-interest rates. The rates can even be 100% or higher. They can be better to help your credit than secured loans, but they are quite predatory just like secured loans.
Secured Loans
One of the most popular secured loans, payday loans, fall into this category. Payday loans are checks that an individual writes to a lender to be cashed on their payday.
Title loans use a property as collateral to ensure the loan will be paid in some way. If the borrower defaults on this loan, the lender gets the collateral in full.
Unsecured Loans
These loans often offer super strict repayment terms and extremely high-interest rates (100% to 300%) You might be able to find loans here that are a bit reasonable, but you’re going to have to search the internet to find what you need on resources like NerdWallet.
Repairing your Credit
There are many ways to repair your credit which will help your credit score more than a bad credit loan would. First, be sure to make timely payments. Second, pay down as much debt as you can to improve your debt to credit ratio. Then, be sure to analyze your yearly credit report for mistakes and inaccuracies. Report all these inaccuracies to the three credit reporting bureaus.
If you’re looking for a credit loan, be sure to find one that follows the Credit Repair Organization Act. This federal act ensures that the guidelines put out are fair and just, so you can get exactly what you need as a consumer. Be sure to avoid bad credit loans. But, if you find yourself in a rut, pay them off as soon as possible so they don’t negatively affect your credit score. Doing these steps will help getting your credit restoration on its way
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