A bad credit score doesn’t necessarily mean that you won’t be able to get a loan or credit card. According to Experian®, about 16% of the American population has bad credit. That’s a large market for lenders to tap. However, they usually have terms and conditions that you need to be prepared for, like higher interest rates and down payments.
There are specific lenders who cater to borrowers with bad credit. For instance, credit unions may be willing to lend you a personal loan without a credit check. For mortgages, a bad credit score generally means a higher interest rate and a bigger down payment. You may want to factor in taking time to save up extra money for a down payment since a larger down payment can reduce the burden of a higher interest rate. You could also consider government-backed loans like Federal Housing Administration (FHA), United States Department of Agriculture (USDA), or U.S. Department of Veterans Affairs (VA) loans which usually accept borrowers with bad credit scores.
It is also a good idea to save up for a high down payment on an auto loan if you have bad credit. You could also look for a cosigner to help you get the loan as you pay the installments and rebuild your credit. Also, consider a cheaper car or a used car while you save up and build your credit score enough to afford your dream car and the accompanying payments.
For credit cards, you can opt for secured credit cards that approve people with low credit scores. These cards are intended for you to build credit while saving money. They require a deposit that functions as your credit limit.
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