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Borrowing with Bad Credit? Here’s What to Do

An unexpected emergency is the worst kind of financial guest. It arrives unannounced at inappropriate times, like when you’re low on savings and sporting a not-so-hot credit score.

A low score and zero savings aren’t a great combo. One makes it necessary to borrow money, while the other one makes it harder to borrow money. 

So what can you do? Let’s take a look at what a bad score is before exploring your borrowing options. 

What is a Bad Score? 

On a scale of 300–850, a bad score is anything between 300 and 669

It’s Not Permanent!

Unlike your Social Security Number — a nine-digit number that’s meant to stick with you for your entire life — your score is constantly changing. 

It adapts to your borrowing habits as you make them. This means the three-digit score you see at the beginning of the month may not be the number you have by the end of it. 

Ultimately, this is a good thing. Once you understand what impacts your score and credit history, you may change your behavior in ways that make a positive change to your finances.

It may be as simple as changing the way you use your line of credit or credit card. But don’t worry if you don’t have either of these products. It may be possible to improve your credit history without a card as long as you work hard.

Building Positive Payment History Takes Time

The only thing is, building positive credit history may take time. In an emergency, you may not have enough of it to make a meaningful difference to the types of products you qualify for. 

Luckily, you have options if you can’t improve your bad score. 

Try a Personal Line of Credit for People with Bad Credit

Some financial institutions want their borrowers to have a minimum score. Others don’t put as big of a priority on your credit. 

If you find a financial institution that offers a line of credit for people with bad credit (LoC), they likely have other requirements so check to see what you need to qualify.

Consider Using a Secured LoC

Anytime a financial product is secured, it means you have backed your loan agreement with a valuable asset. In the financial world, this is called collateral.

Collateral enters into the bargain as a fail-safe. If you can’t pay your bills on time, your financial institution may collect your collateral as payment — whether it’s a home, vehicle, or some other valuable item. 

Collateral reduces some of the risks a financial institution takes if they grant you funds, so you may receive a greater borrowing amount at lower rates. 

Cosign with a Friend

A cosigner is someone who applies with you when you need to borrow money. This means two things:

  1. They agree to have their finances checked to see if they qualify
  2. They agree to pay your bills if you fail to do so

The second part of this arrangement is a guarantee that, even if you can’t make your payments, your cosigner will pay your bills. 

As a result, a cosigner may improve your chances of being approved.

Bottom Line

Bad credit makes borrowing money hard but not impossible. If an unexpected emergency arrives when your score is 669 or below, you still have some options. Review the ones you learned about here today to see which one works best for you.

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