Many people already know that having poor credit can make it much harder to access a credit card or loan. Lenders use an individual’s personal financial information, such as their monthly or annual income, credit score, and debt history to decide whether they would be a good candidate for a loan or credit card.
Credit scores and credit reports give the lender an idea of how likely the applicant is to repay their loan or pay their card balance. Scoring models use information about an individual’s payment history, amounts owed, credit utilization, and age of credit accounts to give them a score between 300 to 850. A score below 579 may be considered poor credit, though different lenders may have their own definition of a low score.
A low score may be indicative of a few different situations:
- You may not have any credit history to speak of
- You may have a history of late payments
- You may have missed or defaulted on previous loan or card payments
- Your credit score was damaged due to bankruptcy
While it’s possible to improve your credit score gradually and with discipline, some people may need alternative borrowing options in the meantime. Here are four things you can still do with a low credit score:
Secure a payday loan
A payday loan is a short-term loan that borrowers will typically repay in two to four weeks once they receive their paychecks. Payday loans offer a quick way to get some much-needed funds, especially when bad credit makes other borrowing options like loans or credit cards difficult to access. Payday loans may be helpful in emergencies, but you should ensure that you’ll have the funds to repay the loan.
Try a payday alternative loan
Some credit unions offer short-term loans called payday alternative loans. You may be able to borrow a few hundred dollars and can repay what you owe over periods ranging from one to six months. Borrowers must be credit union members to avail of this type of loan and may have to pay an application fee.
Get a credit card cash advance
If you already have a credit card, you may be able to get a credit card cash advance. A credit card cash advance has no paperwork or credit score requirements, and you can access one easily at your lender’s ATM. Cash advances may have additional fees and higher interest rates than regular purchases on your credit card, so read your credit card terms carefully before getting one.
Consider personal loans for bad credit
Some lenders provide personal loans specifically for borrowers with low credit. Each lender will have their own evaluation criteria and will offer loan terms and rates based on their own policies.
The benefit of a personal loan from a reputed lender is that paying off the loan on time may actually help you build better credit. However, as eligibility standards differ widely, you’ll have to conduct your own research to find out which loans work best for you.