5 Ways to Use Personal Loans to Improve Your Credit Score!
Posted November 1st, 2009
by PersonalLoans.org Staff
It’s no fun having bad credit. When you have a low credit rating, it can be hard to get a house, a car or even a retail store’s credit card. Many lenders won’t even look at loans or lines of credit for those with bad credit.
Fortunately, there are ways to improve your credit rating. One way to start improving your credit rating and get things back on the right track is via personal loans.
Personal loans come in many shapes and sizes. Some personal loans are designed to help you consolidate bills. Some are designed to give you cash to cover an immediate expense. While not all personal loans are aimed at people with a poor credit rating, some are.
There are several steps in using personal loans to improve your credit rating:
- Know why your credit rating is low. Get a copy of your credit report, and look at what’s there. You’ll possibly see things like late payments, nonpayment, or judgments against you. Knowing what’s on your credit report will help do a couple of things for you. First of all, you can dispute any errors on your credit report with the credit reporting agency. Second, you’ll know exactly what lenders are looking at when they’re considering your personal loan.
- Make sure you have documentation. If you’re disputing an error on your credit report, it’s up to you to make the case to the credit reporting agency that there’s an error. Make sure you retain copies of anything you send, of course.
- Be ready to answer lenders. Many lenders who work with customers that don’t have the best credit are willing to give you a chance. Still, they may ask you why your credit report contains certain items. Be honest, and be ready to explain how you got where you are today, and how that will or will not affect your ability to pay.
- Pay down debts before you apply. The amount of your regular income in relation to your debt is a key factor that creditors look at when considering whether to give you a personal loan. Find ways to lower that ratio and you’ll increase your chances of getting approved.
- Consider a cosigner. Sometimes, you can get a cosigner with a better credit rating to sign on a personal loan with you. This increases your chances of getting approved. In some cases, you may be able to get someone to add you as a cosigner to an existing account. This will also help you to increase your credit rating.
Repairing bad credit takes time and effort. Regardless of what some self-proclaimed “experts” might tell you, it isn’t going to happen overnight. Still, if you follow these basic guidelines, there’s no reason you won’t be able to qualify for a personal loan which can help dramatically increase your credit rating.