Improving Bad Credit Can Boost Chances of Getting a Personal Loan

[Jan 12, 2009.]

 

The credit crunch has made it difficult for people with bad credit to qualify for personal loans. But potential borrowers who have an income and are willing to focus on fixing their bad credit, will dramatically improve their chances for getting personal loans.

These days many lenders are unwilling to approve personal loans for people who have credit scores under 700. "About two years ago, you could have had a score of about 620 or so to get a lender’s best rate on something. Now, lenders are really looking at a rate of 760 at the least," Kelli Grant of Smartmoney.com told WSAV.

Here are some steps that can help boost credit scores. First, pay bills on time. It's important to mail payments early enough that they reach creditors by the due date. Credit card bills and other monthly statements sometimes give the exact day and time when payments need to be received to avoid late charges. 

Avoid going over the limit on credit cards. The lower a person's debt level is compared to the amount of their credit line, the better off they'll be. In some cases people have found themselves dangerously close to their limit after their credit card issuer decreased their credit line. Try to keep balances less than 35% of the credit limit.

Pay more than the minimum due on debts. This will show lenders that a potential borrower is managing their money well and serious about repaying debts.

People should make sure their credit report accurately reflects debts that have been paid off.

Getting a small personal loan may be a better alternative to using high-interest credit cards. It's gotten tougher to get approved for personal loans but there are banks that are willing to lend to credit-worthy customers.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.