How to qualify for a loan with bad credit

When you need a loan, the timing isn’t always perfect. If you struggle with financial issues that cause bad credit, you may find it difficult to get approved for the loan you need.

Luckily, even with bad credit, you have options. There are many online lenders specializing in loans for bad credit. Depending on the reason for your bad credit, you may be able to qualify by showing that you have a dependable source of adequate income that will make it easy for you to make all your payments on time.

Other factors besides credit scores that help you get a loan

You may pay more interest on a loan if you have bad credit, but it isn’t impossible to get approved, especially if you have other factors working in your favor.
Lenders that work with people who have credit struggles understand that credit scores aren’t the only important factor.

Your home state

Not every lender can offer services across all 50 states. Check to make sure loans are available where you live. Some states have loan companies that specialize in helping people get loans, even with bad credit. They are non-profit companies that also offer free credit counseling.

Income and employment

If you work at the same company for a long time, have a dependable income level, and can demonstrate those two things with tax returns and pay stubs, you have a better chance of qualifying for a loan.


If you have equity in your home or your vehicle is paid off, you may qualify for a special type of loan that uses either your home or your car as collateral. A home equity line of credit is a secured loan that may be more flexible where your credit status is concerned.

Improving your credit score in 30-45 days

One way to help your case when you have bad credit and need a loan is to try to improve your credit score within a short amount of time. This is best accomplished by visiting to get your free copies of each of your three credit reports. Go through those reports carefully and look for mistakes and inaccurate information. Each of the three credit reporting agencies, TransUnion, Equifax, and Experian, have a section of their website dedicated to helping you dispute incorrect information on your credit report.

In fact, the credit bureaus will contact the companies reporting the false or inaccurate information for you. They have 30 days to substantiate the information or remove it from your file.
Since about 20% of credit reports contain inaccurate and harmful information, this step is crucial to successfully raise your FICO credit score.

Another way you can give your score a boost is to pay down your revolving charge accounts. If you have credit cards with balances equal to or larger than 30% of the total credit limit on the account, work on getting those balances reduced.

Read more about improving your credit score here.

Here are a few things to avoid when trying to increase your credit scores so you can qualify for a loan:

Don’t cancel credit cards or charge accounts. Part of your FICO credit score is calculated by looking at how long you’ve had your oldest account. Canceling cards will reduce the average age of your credit cards.

Don’t use your credit cards unless you know you can pay off new charges within the grace period. Credit card interest rates are high, especially if you have credit that’s been sliding down for awhile. Making purchases with your credit card when you know you can’t pay the bill in full not only increases the amount of money you’ll pay for interest on the card, it reduces your available credit. This is one of the key factors that could damage your credit, further.

Ideally, you’ll keep your credit card balances below 8.9%. Make the most of the credit scoring algorithm used by the credit reporting agencies by concentrating and reducing your credit card balances as quickly as possible.

Don’t accept every credit card offer that comes along. Many credit card companies that target people with bad credit charge outrageous fees, putting their customers in a no-win situation. Pay special attention to annual fees charged upfront in combination with low introductory credit limits. For example, one popular credit card offers a $250 credit limit and a $79 annual fee, so you owe $79 the day you open the account. They also charge 29.99% APR and take 5-10 business days to process payments.

Ideally, you’ll have three open credit card accounts. If you can find credit cards with good interest rates and fair terms and you don’t already have three or more accounts, consider opening a new credit card to help your credit score. Improving your score this way takes longer than 30-45 days, but it’s easy to do.

If you need a loan, but your credit is in trouble, don’t settle for the first company that offers you money. Read the terms and conditions carefully, think about how the payments fit into your budget and proceed with caution.

If you can make the payments on time every month and the company reports to the three credit reporting agencies, you’ll be well on your way to a healthier credit score.

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