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Are Loans Unavailable to People with Bad Credit?

A common misconception among people is that if you have poor credit you will not qualify for a loan. Fortunately, there are many companies willing to offer you a loan, even if your credit is below par.

What is a good credit score? Have you ever wondered where you fit in on the spectrum? Well, truth be told it depends on the scoring system in question. The FICO and VantageScore 3.0 credit scores are 300 on the low end and 850 on the high-end. Within that range are bad credit scores, poor credit scores, fair credit scores, good credit scores, and excellent credit scores. The ratings are as follows:

  • Bad Credit scores are less than 600
  • Poor Credit scores range from 600 through 649
  • Fair Credit scores range from 650 through 699
  • Good Credit scores range from 700 through 749
  • Excellent Credit scores are 750+

There is just enough latitude within each category to sway the opinions of a lender one way or the other. For example, a lender who is looking to fast-track the approval of credit applications may consider a score of 680 adequate, while another lender will only consider applicants with a credit score of 750+. Sometimes, lenders are willing to drop their credit score requirements to a minimum of a fair credit score at 650+. It all depends on which loan provider you are approaching, and what type of credit you are applying for.

There are several different credit score range scales on the market. These include VantageScore 3.0 (from 300 to 850), Equifax (from 280 to 850), TransUnion 2.0 (from 300 to 850), and FICO scores (from 300 to 850), among others. It is difficult to account for the lower minimums and higher maximums, but the higher your credit score, the better the T&C of your loans, interest rates, and repayment terms.

What about People with Poor Credit Scores?

Another misconception is that all people with poor credit scores have poorly managed credit. This is not true. If you are applying for your very first credit card, personal loan, or business loan, it is likely that your credit score is low. Additionally, if you have never had your own bank account, but you are financially responsible, you will also have a poor credit score.

There are many reasons why a person may have a poor credit score and not all of them are related to late payments, an inability to repay debt, excessive credit utilization, lack of diversification in your credit profile etc.

Your credit score is determined by the following factors:

  • Applications for New Credit accounts for 10% of your score
  • Different Types of Credit you’re using account for 10% of your score
  • Your Credit History accounts for 15% of your credit score
  • The Amount You Owe accounts for 30% of your credit score
  • Your Payment History makes up 35% of your credit score

Bad Credit Loans are Available

It’s important to point out that loans are available for people with bad credit. Your credit score is an important determinant of your credibility, but you can improve your credit score by acting in a fiscally responsible way.

It takes time to establish patterns of behaviour, but the new credit system in the US places more emphasis on your recent credit history and disregards liens, or judgments which happened a long time ago.

Many bank and non-bank companies are willing to consider people with bad credit for loans. In fact, you can be approved from as little as $250, all the way up to $5,000 with select operators. To get started, customers are required to answer a questionnaire, accept the terms of the loan, and wait for the funds to be deposited into your account.

Bad credit loan companies do not charge anything to make an application, and responses are typically received within minutes. Once approved, the funds will be available within 24 hours from most lenders. Note that banks are more stringent when it comes to approving loans to people with poor credit, but non-bank lenders will often expedite these services for clients.

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