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Getting a personal loan can be straightforward. You only need to meet certain requirements and have a good credit score. With those in place, you'll have the money in your account in no time.

But what if you have bad credit or no credit? Does this mean you can’t borrow money from a reputable lender?

Let’s get one thing out of the way. Lenders aren’t villains. They want to know that you can pay back what you borrow. In their mind, the higher your credit score, the more likely you can pay back the loan in full and on time.

But even if you have bad credit, don’t despair. You can find the right bad credit loan to meet your financial need.

This guide offers an in-depth overview of credit and credit scores and explains how you can fix yours. It also provides borrowing options to help you get the financial help you need. With this information, you can improve your credit and gain access to funds.

Can I Get a Loan Even With Bad Credit?

You might have read that lenders offer personal loans only to individuals with good-to-great credit. For example, Experian considers a credit score between 670-739 as "good." But don't despair if you have a lower credit score. Even with a low credit score, bad credit loans allow you to borrow money.

But first, you need to understand credit and your credit score. Knowing your credit score and history helps you understand your loan options. This information also impacts your job and housing prospects. Credit supports your ability to buy a car or get rental or home insurance.

Knowing your credit information means you can find the right borrowing option. It also prepares you for success with other life activities.

What Is Credit?

Here's the simple answer: Credit lets you borrow money from a bank or other institution. You then agree to pay back the borrowed funds within a specific period.

This credit arrangement shows up as your credit history. This, in turn, generates a credit report. That report details how you use your money, how many loans you have, and whether you pay everything off on time.

Credit checks are an unavoidable fact of life. Whether you take out a loan, sign up for a utility service, or rent an apartment, your credit information is made available.

Credit Reports and Credit Scores: Knowing the Difference

"Credit reports" and "credit scores" aren't the same thing:

  • Your credit report contains credit activity information, loan-paying history, and credit account status. Three national bureaus – Equifax, Experian, and TransUnion – issue credit reports.
  • Your credit score is a three-digit number based on your credit report information. VantageScore and FICO generate these credit scores.

That’s not all. You likely don’t have a single credit score. You could have many credit scores, depending on the credit bureau's reporting criteria. Credit scores can also differ based on loan type or scoring models.

The goal should be to improve your credit score. A higher credit score means access to better loans with lower interest rates.

Credit scores have been around since the 19th century. Merchants formed reporting agencies to measure business customers’ creditworthiness. Then mass retailing and installment payments became popular in the late 1800s. This required a system to ensure on-time payments. This led to the beginning of consumer credit scores.

From the 1930s to the 1960s, quantitative data supported credit scores. Department stores led the way, assigning "points" to assess customer creditworthiness. Industry consolidation also took place. This reduced the number of U.S. credit bureaus from 2,000 to the three used today.

However, credit scores and analyses were still subjective and unfair. In 1989, Fair, Isaac, and Company (FICO) introduced an objective credit scoring system. Department stores depended on FICO. Government-sponsored agencies Fannie Mae and Freddie Mac also relied on FICO scores to underwrite mortgages.

In 2003, Congress enacted the “Fair and Accurate Credit Transactions Act.” This allowed Americans to access their credit reports for free. Three years later, the three credit bureaus created VantageScore to compete against FICO.

How Are Credit Scores Calculated?

Your credit score depends on these factors:

  • Payment history: The percentage of on-time bill payments
  • Credit use or utilization: The debt you add versus your available debt
  • Credit history: How many accounts you have and how long they've been open
  • Credit mix: Types of debt, like student loans, mortgages, car loans, and credit cards

When a lender wants to view your credit score, they’ll either use a hard inquiry (or hard pull) or a soft inquiry (or soft pull). A hard inquiry means the lender examines your credit reports and credit scores in depth. Because of this, a hard pull could temporarily reduce your credit score.

A hard inquiry might take place if you respond to a pre-approved credit card offer. A hard inquiry could also occur if you request an increase in your credit line.

On the other hand, a soft inquiry doesn't impact your credit score. This is because a soft pull isn't attached to a specific credit application. A soft inquiry might occur if a future employer examines your credit report.

The Insider’s Guide to Boost Your Credit Score

Even if your FICO or VantageScores are low, you can still learn how to build your credit score. Consider the following steps to start building credit this year.

How to Build Credit with Credit Cards

Perhaps you don’t have credit because you’re a college student who recently graduated. Or maybe your credit score is low because of severe financial challenges. Regardless of the cause, don’t despair. You can build credit with credit cards. Here’s how. If you are a college student, you might be able to apply for a special student credit card or starter credit card. You might also consider obtaining a secured credit card. With a secured credit card, you put a cash balance on that card, using that amount as “credit.” You then pay the balance owed each month to maintain that balance. This proves your ability to pay debt off over time.

However you decide to build credit with credit cards, be careful not to max them out. Pay the balance off each month, and don't use more than 30% of your credit limit.

How to Build Credit Without Credit Cards

Credit cards aren't the only way to build credit. In fact, lenders prefer to see different types of credit and loans. This diversity shows lenders that you can successfully manage different debt obligations.

One way is to use credit-builder loans to improve your credit score. You can find these at smaller banks or credit unions. Through a credit-builder loan, you pay funds into an account each month. You receive the money at the end of the "loan" period. The process can both build your savings and your credit score.

Another way to build credit without credit cards is through installment loans. Through this arrangement, you pay a fixed amount over a set period until the loan's payoff. Auto loans are a good example of an installment loan.

How to Remove Credit Inquiries from Your Credit Report

You can improve your credit scores in other ways. One method is to remove hard credit inquiries from your credit reports. To do this, you need to monitor the Equifax, Experian, and TransUnion reports.

Each year you have free online access to all three credit reports. Once you've downloaded the information, look for irregularities. If you find a hard inquiry you didn't know about, send an inquiry removal request letter to the specific credit bureau.

Boost Your Credit Score—For Free

Finally, there’s an easy (free!) way to boost your credit score. This particular program is available through Experian, and it’s called “Experian Boost.”

Experian Boost gives you credit for the monthly bills you already pay. These can include rent, utilities, and even streaming services. To take advantage of this service, link your bank account to your Experian account. The organization examines qualifying bills. Based on your payment history, you could see an immediate boost in your credit score. For more information, visit Experian.

What Could Impact Your Credit Score?

The following explains issues that could lower your credit score.

What Effect Will Repossession Have on Your Credit Score?

Failure to repay your loan could result in repossession. This happens when a lender takes property back from you for non-payment. Repossessions benefit no one. They're costly for the lender. And they leave you without a place to live or a means of travel.

Adding insult to injury, a repossession can drop your credit score by up to 100 points. Furthermore, late payments and collections leading up to that repossession stay on your credit report for seven years.

It's best to avoid repossession at all costs. And the best way to do this is to pay your loan on time.

If you fall behind on payments, reach out to your lender at once to work something out. The lender might be willing to refinance your loan. Or you could work out a deal to sell the property and use the proceeds to pay off the loan. But ignoring the situation guarantees a poor credit score.

How Will Medical Bills Affect Your Credit?

Medical bills are a little different. They only impact your credit if you fail to pay and collection agencies become involved. The good news is that the credit bureaus require 365 days before the debt shows up in your report. But once that information appears, it stays for seven years.

Another issue is that "late payments" vary based on the health care provider. Some might want payments within 30 days. Others might wait for 90 days to get the collection agencies involved. Be sure to understand how your healthcare provider defines late payments.

What Does a Late Rent Payment Do to Your Credit Score?

Even one late rent payment can drop your credit score. What is "late?" A late payment is anything after 30 days. Federal law prohibits reporting a late rent payment until after that 30-day window. But once the information appears, it stays on your credit report for seven years.

What Happens to Your Credit Score When You Skip a Bill Payment?

Your on-time payments make up 35% of your FICO score. Skipping even one payment can reduce your credit score. Additionally, late fees and penalties can add to the problem. If you think you might not be able to make a credit card or loan payment, don't ignore the situation. Reach out to the lender or creditor at once.

Why Jora Credit?

We are a state-licensed, direct lender providing online loans that give you access to the funds you need.
It’s easy to apply right from your phone, laptop or tablet – anywhere, anytime. And it only takes a couple minutes.
There's no application fee, no origination fee, no prepayment fee and no late fees.
Accept your loan by 10:30 am Central time (Monday - Friday excluding holidays) and you can get your funds on the same day.*

8 Easy-to-Avoid Credit Mistakes

Another way to take care of your credit score is to avoid credit mistakes. Here are eight of the most common.

1. Ignoring Your Credit Reports

You can access your credit reports from all three bureaus for free once a year. Take advantage of this to view your credit history and payments. Consistent monitoring also helps you spot errors. You can then correct them before they impact your credit score.

2. Making Late Payments

We've said this before. On-time payments comprise a large part of your FICO score (35%). As such, you must pay on or before the due date. Set up automatic payments if you tend to forget. And reach out to your lender or creditor if you need help.

3. Taking on Too Much Credit/Debt

Applying for a lot of credit or debt creates two problems. First, it suggests you might be taking on more than you can afford. And second, each credit card application or loan request generates a hard inquiry on your credit report. Too many of these can mean a lower credit score.

4. Using Too Much of Your Credit

Just because you have credit doesn't mean you have to use it all. Credit utilization is another critical metric on your credit profile. Maxing out your credit cards increases utilization and lowers your score. The rule of thumb is to use less than half of your available credit. Even better? Strive for a 30% or less utilization rate.

5. Paying Only the Minimum Amount

Making minimum payments on your credit cards does prevent late fees. It also won't impact your credit report. But paying just the minimum doesn't stop interest from mounting. This increases the amount you owe, making it harder for you to pay off your debts.

6. Closing Older Credit Card Accounts

It might be tempting to close that older credit card account once you pay it off. Don't do that. Another important credit score factor is your credit accounts' ages. Lenders like older accounts because they show your ability to pay off debt over time.

7. Relying on Cash Advances

Here's an important rule: Use credit cards for credit only. Do not use them for cash advances unless you have no other choice. These advances come with upfront fees, as well as daily interest charges.

8. Spending Only for the Rewards

Using your credit card to get cash back on purchases or free airline tickets might seem like a great idea. But it really isn't. You could end up buying more than you need just to get those perks. These "rewards" could lead to overspending, increased debt, and a lower credit score.

How to Find the Best Bad Credit Loans

By now, you know that it's possible to rebuild your credit fast by paying debt on time and rebuilding your credit scores. But you might need money now. Perhaps you need emergency funds or need cash to cover unexpected legal fees. You might need to replace a broken hot-water heater or fund a dream vacation. The good news is there are loans available for bad credit. Finding those opportunities requires legwork and research. But it is possible to find the easiest loan available for your specific situation.

Here are some great loan options if you have bad credit.

What our customers are saying

Online Loans

With online personal loans, the entire borrowing process takes place online. You don't have to set foot in a bank for paperwork, prequalification, or approval. You can complete the application process anywhere and at any time and get quick approval.

Online loans are available from lenders like Jora Credit or even traditional banks. You have many online loan options, too. Online loans include installment loans, cash advances, title loans, no-credit-check loans—and more.

Keep in mind that not all online loans are ideal for those with bad credit. Another thing to consider is that interest rates might be higher. Before applying, make sure your targeted online lender provides loans to consumers with bad credit.

No-Credit Loans

With a no-credit loan, the lender doesn't need your credit score for approval. The focus here is on your income and earnings versus your credit history.

The process means you can avoid a hard credit pull, lessening the chances of lowering your credit score. No-credit loans also have a quicker approval process. Repaying the loan on time also helps your credit score.

But there are some downsides to this bad credit loan. The lender takes more risk, which means higher interest rates and fees for you. Additionally, there's no guarantee that the lender will accept your application. An unstable employment history or low income could lead to rejection.

Payday Loans

Payday loans, also known as cash advance loans, are short-term, smaller loans that are less than $500. They’re called “payday” loans because you repay them in full when you receive your next paycheck. The advantage of a payday loan is that there are few requirements. All you need are an active bank account, proof of income, and an ID. Approval can also be quick.

But this type of loan has several downsides. Many payday loans carry triple-digit interest rates. Failure to immediately pay off the loan could trap you in a horrible cycle of escalating debt.

Even after this, you might be asking yourself, “where can I find payday loans near me?” One way is with Google. But don’t go with the first company that pops up.

Payday loans can be a solution for quick cash. But be sure to pay the loan in full by your next paycheck to avoid high interest rates.

Installment Loans

An installment loan is a lump sum you borrow for a particular purpose. An auto loan is a type of installment loan. So is financing you might apply for when buying furniture or appliances.

Upon receiving the funding, you repay a certain amount over a set period until you pay off the loan. Banks and finance companies offer loans, as do online companies like Jora Credit. Installment loans can help you budget, as the weekly or monthly payments don't change, and approval is quick. If you have bad credit, a lender might also examine other factors like employment history and income.

Jora Credit's installment loans don't always require a credit check—but others might. Keep in mind that a hard credit pull could lower your score. Additionally, some installment loans might carry high interest rates.

Secured Personal Loan

If you can't get a personal loan because of bad credit, consider a secured loan. This is a loan "backed" by collateral. Collateral is a physical asset you own, like a car, bank account, life insurance policy, or other valuable items.

Many lenders regard secured loans as less risky than other types. If you default on payments, the lender can take possession of the asset, and sell it to recoup the investment. Because of this, interest rates might be smaller.

But applying for a secured loan doesn't mean you'll get it. The collateral you offer might not be useful for the lender. Additionally, not all secured loans are available to those with bad credit.

You also need to make sure you can pay off the loan. Even missing a few payments could result in repossession of your collateral. Repossession can hurt you financially and harm your credit score.

What to Watch Out For with Bad Credit Loans

By now, you might be feeling a little better about your borrowing prospects, even if your credit is poor. But beware. Scammers regularly target vulnerable individuals with illegal or non-existent bad credit online loans.

Here are the red flags to watch for when researching bad credit online loan options.

“Guaranteed” Approval

Let’s say that one day you go out to your mailbox and find a letter from a local “lender" with some good news. You're automatically approved for a loan!

Sound too good to be true? It is. This "lender" is a scammer trying to get your personal and financial information. No reputable lender ever promises upfront approval without extra information from you. Any lender worth its salt wants assurances that you can pay off a loan, even with bad credit.

So, if you receive a notice of "guaranteed loan approval" via snail mail, email, or text, get rid of it immediately.

Aggressive Outreach

Don't trust any "lender" that emails, mails, or cold calls you out of the blue. These bad actors, unfortunately, target bad-credit borrowers with "too good to be true" offers.

It's easy to throw away something you receive in the mail or to delete an email or text. But if you receive harassing calls, sign up for the National Do Not Call Registry. Also, check with your state's attorney general's office to determine the next steps.

Above all, don't engage with these companies in any way.

Pressure to Act Immediately

Borrowing money is a big step. It requires consideration, research, and clarification when there are questions, and reputable lenders understand this. They give you the time and space you need to decide, and they're also available to answer concerns.

Fraudsters and scammers have no such intent. Their goal is to get you to sign on the dotted line as quickly as possible. Any company with a hard deadline ("this deal only lasts until tomorrow") is less of a lender and more likely a scammer.

No Obvious State Registration

Reputable lenders must register in the states where they do business. For instance, Jora Credit is licensed in the states in which it conducts business.

Most lenders will register with a specific agency (such as the secretary of state). Those that don’t are likely fraudulent companies and scammers. If you find a lending company without state registration, that company violates the law. This means you have no recourse should that company cause you harm.

No Physical Address

It’s easy to set up a website and P.O. Box number. Unfortunately, these are part of a scammer's successful toolkit. Legitimate lenders—even those that operate 100% online—have physical addresses. The addresses are prominently displayed on websites and are easy to find.

That physical address should also be accessible through Google Maps or Apple Maps. If the location is in a house or residential neighborhood, this could also suggest potential fraud.

Non-Secure URLs or Websites

The lender you work with must have a secure website. A "leaky" site means a higher risk that a hacker will make off with your data.

There are two ways to determine if a lender's website is secure:

  • The website address starts with "https" rather than "http." That extra "s" stands for "secure."
  • Website pages have padlocked symbols. That symbol means the web page you're visiting—and are entering information into—is secure.

Demand for Upfront Payment

You don't have to pay anything upfront to a lender. You're looking at fraud if a "lending" company requests money from you before you even begin the loan process. Don't buy into the story that the company needs that money to cover processing fees or other costs. Be wary of any pressure.

A reputable lender will outline any extra costs during the application process. You pay those costs only after the loan's approval and funding, not before.

Frequently asked questions

We bring honesty and transparency to financial services technology

When you complete and submit an application for a Jora loan, we access the credit report of most applicants. Multiple credit inquiries in a short period of time may have an impact on your overall credit score.

How to Apply for a Bad Credit Loan

Now you know that you can find a bad credit loan. You know what to do to repair your credit and how to avoid bad players. Now it's time to research your options and apply for that financing.

Here are the steps to take when applying for a bad credit loan.

Step 1: Understand Why You Want the Loan

Bad credit loans can help you build credit while providing you with cash for certain situations. But make sure you know why you're applying for the loan before you do so. There are so many reasons why you might need extra financial help. Here are some of them:

  • Buying furniture or appliances
  • Financing a car or truck
  • Consolidating existing debt
  • Paying down emergency medical bills
  • Working on home improvement projects
  • Paying for a wedding or funeral
  • Bridging a small financial gap between paydays

Knowing exactly why you need the money can help make your loan search easier. It can also help you save time and effort during the process. Additionally, understanding your monetary needs can direct you to the right personal loan type. It's also important to know when not to use a bad credit loan. You shouldn't use a personal loan for the following purposes:

  • College tuition: Federal student loans typically offer lower interest rates than personal loans. Additionally, most student loans don't require a credit check. And based on your financial need, you or your children could qualify for subsidies from the U.S. Department of Education.
  • Down payment on a home: Most mortgage lenders don't want you to use a personal loan for a down payment because a personal loan increases your debt-to-income ratio. Home mortgage lenders typically like a DTI ratio of less than 43%. A personal loan could increase your DTI, leading to a denial of your application. Furthermore, assuming additional debt to buy a home could signal that you don't have enough money to purchase or maintain a home.
  • Investments: Higher interest rates on personal loans mean they're unsuitable for investments. Investments tend to be risky. If the investment underperforms, you could end up with a very poor return on investment. Plus, you still have to pay back the loan—with interest.
  • Starting a business: While it might seem like a good idea to use a personal loan to launch a business, it isn't. For one thing, that personal loan won't help you build business credit. That loan is under your name. And if your business doesn't repay the loan, the lender could sue you personally to get the money back.
  • Basic living expenses: A personal loan might be helpful if you have a temporary hardship, and you plan to pay it off at once. But if you're regularly borrowing to cover monthly bills, this creates more problems. In addition to paying your bills, you have to pay the loan—plus interest.

The purpose of your bad credit loan is to give you an infusion of extra cash. You can then use that cash to pay for unexpected expenses or to finance certain activities or requirements.

Step 2: Gather Necessary Documentation

Let's face it. No reputable lender will hand over money just because you ask nicely. Nor should they. That lender wants assurances that when they approve a loan, you'll have the resources to pay it back.

This can especially be the case with a bad credit loan. With a poor credit score, the lender needs other documentation to prove your ability to repay.

At the very least, the lender will need proof of employment, such as paycheck stubs, W2 forms, or tax returns from previous years. Also, gather bank accounts and other statements. Be sure to have your picture ID handy as well.

Get this information before you start searching for lenders so you can better prepare for the application process.

Step 3: Keep up With Your Credit Score/Reports

Before you find your lender, get your hands on your credit score/s and reports. That information lets you see what the lender will see. It also helps you spot mistakes or inquiries you didn't know about.

You can download free annual credit report information from all three credit bureaus. Take advantage of this. The more information you have, the better your chances of obtaining a bad credit loan.

Step 4: Shop and Compare

There are many lending options available for those with bad credit. Those options offer different loan amounts, interest rates, and terms. As such, it's important to do your research and comparison shop. You don't have to accept the first lender that comes back to you with a quote.

Also, know ahead of time what interest rates, loan amounts, and terms you're willing to accept. This knowledge can help narrow the field and make your search process easier.

Furthermore, research that lender's reputation. Look for reviews about the company. Be sure that the company has a state license to do business. You can find this information by looking at your state's regulator or financial agency.

Other ways to determine a lender's reputation is by looking on the Better Business Bureau (BBB) and Trustpilot websites. These tell you what other customers are saying about them. For example, Jora Credit has 4.7 out of 5 stars on Trustpilot, along with 1,210 reviews.

Another good way to determine a lender's reputation is through online testimonials on their main website.

Step 5: Get Prequalified

Getting prequalified gives you a good idea of how much money you can borrow and at what interest rate. Prequalification isn't a specific offer but tells you what you might qualify for.

With a prequalification, the lender examines basic information like proof of employment, your Social Security number, and loan purpose. They use this to provide you with an idea of your annual percentage rate (APR), loan amount, and monthly payments.

Even better is that prequalification doesn't require a hard credit pull, which is helpful if you're building your credit. You can prequalify with multiple lenders without impacting your credit. This can also help with comparison shopping.

Step 6: Understand All Fees

We mentioned above that you won't pay upfront costs during the loan application process. But there may be fees connected with that money. Before signing on the dotted line, it's essential that you read all the fine print and ask about any "extras."

For example, if you have a bad credit score, you might represent a higher risk in the lender's eyes. It's a good idea to understand if that risk means a higher interest rate. For example, you could pay a monthly fee for processing activities.

Be sure to ask questions about any costs or issues you don't understand. The last thing you need is surprise fees.

You CAN Get Good Loans with Bad Credit

If you have bad credit, you might think you can't get a loan. The good news is that you can rebuild your credit. And you can borrow money, even with poor or no credit.

While you work hard to build your credit, research to find the best loan for your situation. You have many available options, so it's important to look for financing with interest rates and repayment plans that make sense.

Also, consider adding Jora Credit to your list of potential lenders. We are a state-licensed direct lender. Our online loans come with quick approval and reasonable interest rates.

It only takes a few minutes to apply for a Jora Credit loan. To apply for your loan, contact us today!