Finance

Knowing what to do if you need a loan with bad credit 

It is not uncommon to have bad credit or derogatory marks on your credit report. As of April 2018, FICO data indicates approximately one in ten people have a FICO® Score 8 below 550, considered to be poor credit. Approximately 23% of people have some debt with a collection agency, which could affect their credit score.


Your credit history is the result of how you use and repay credit. If you have good credit, you can get credit at a lower interest rate, but if you have bad credit, you cannot. If you have bad credit, you may have trouble getting a loan, so what can you do?


Consider these tips before you resort to expensive borrowing products, such as payday loans, if you are seeking a 400 loan bad credit.

What does bad credit mean to you?

Companies generate credit scores using their own credit scoring models. In order to evaluate credit applications, lenders use the FICO credit scoring models. There are six FICO scores, ranging from 300 to 850.

In September 2019, the average FICO® score was 706, according to FICO. People whose credit scores are fair to poor (i.e., below 670) may not qualify for some types of loans.

People with bad credit have a variety of reasons for doing so. Your credit score can be lowered by missed payments, credit card debt, or derogatory marks such as bankruptcy or foreclosure on your credit report. For more information, visit pixieloans.co.uk.

It is your credit score that determines your credit GPA

By comparing credit scores and credit reports, you may be able to gain a better understanding of how each works.


Your college education probably included subjects like English, math, and history. Upon completion of the course, you received both an overall grade and individual grades for each assignment. At the end of the semester, you were given one single score – your GPA – for all the work you did during the semester.


This concept is the basis for your credit report and score. There is a list of your debts, what you owe, and how you have paid them off in the past on a credit report. The credit score, however, resembles your grade point average. Credit reports reveal how well you have managed your credit, which determines your credit scores.

What if you don’t have a good credit rating?

The cutoff credit score varies from lender to lender. In the event that your score falls below this cutoff, you may have less chance of getting your loan approved. If you have a credit history above that mark, you may have a better chance of getting approved. In addition to your debt-to-income ratio, a lender may also take other factors into account when determining if you should receive a loan (here’s how to calculate your ratio).

In the case of a bad credit situation, can I still get a loan?

You may think you have no other option but to obtain an alternative loan, such as a payday loan or car title loan, with a low credit score. If you think you won’t qualify for a traditional credit card or personal loan, short-term loans don’t require a credit check, which makes it easier to qualify.

Final thoughts

Bad credit can make getting a loan difficult. Your credit may still be good enough to get you a loan even if you have bad credit.

Taking out a personal loan and making payments on time can improve your credit score with bad credit. Therefore, if you ever decide to purchase a home or something larger, you will have a better credit score.

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