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Several factors play a role in whether or not you’ll be able to qualify for a loan, and your credit score is one of them. With a good credit score, you’ll have your pick of the litter when it comes to the types of loans that you may be able to secure. Not only that, but the interest rate that you’re offered will likely be lower as well, which can make your loan a lot more affordable.
But with a bad credit score, your chances of landing a loan diminish greatly. And even if you were to get approved, the interest rate you would be offered would likely be pretty high. This can make your overall loan much more expensive.
Could your credit score use a boost? If so, your chances of getting a loan might be slim.
But luckily, there are bad credit loans in Red Deer that may be available to you as an alternative to help you get the money you need to cover whatever expenses you have right now.
Let’s go into further detail about bad credit loans in Red Deer and whether or not they’re something you should consider looking into.
What are bad credit lenders looking for in applicants? Learn more here.
What is Bad Credit?
Bad credit is usually considered a score of less than 600, generally speaking. Credit scores in Canada range from 300 to 900, and in order to get approved for a conventional loan, a minimum credit score of 650 to 680 is usually required. If you fall below that range, it may likely be a result of past missed payments, mounting debt, or applying for far too many loans or credit cards.
Not only can bad credit affect your ability to secure a loan, but it can also impact other aspects of your life in Red Deer. For instance, landing an apartment, securing a cell phone contract, or even getting a job can all be negatively affected by a bad credit score.
What Factors Affect Credit Scores?
We’ve briefly touched on some things that can have a negative impact on your credit score. Let’s go into them all in greater detail. The following are factors that influence your credit score:
Payment history – If you have a history of missing payments, your score will be negatively affected. In fact, payment history plays the biggest role in credit score calculations.
Credit utilization – Your credit utilization refers to how much of your available credit you use every month. For instance, if you have a credit card limit of $4,000 and spend $2,000 each month, your credit utilization would be 50%. It’s suggested that no more than 20% to 30% of your credit limit should be used every month, or else your credit score could suffer.
Hard credit pulls – Whenever you fill out an application for a new loan or credit card, you’re giving the creditor or lender permission to pull your credit report. Whenever that happens, a “hard inquiry” will be noted on your report, which can temporarily pull your credit score down.
To learn more about getting your credit checked in Canada, check out this article.
Credit length – Lenders need something to go on in order to accurately assess your credit. But if you don’t have much of a credit history, there will be little information to base their decision on. It’s a good thing to have a lengthy credit history, but not so good if your credit length is very short or completely brand new.
Debt load – Having a huge pile of debt can impact your credit, as it will directly affect your debt-to-income ratio. This is a measure of your debt load relative to how much you earn. Too much debt can max out your income, making it difficult to add another loan to the mix.
Debt mix – Having a diversified financial portfolio is a good thing because it tells lenders that you’re able to handle a variety of different debts, such as a credit card, mortgage, student loan, and car loan.
Can You Secure a Loan With Bad Credit in Red Deer?
As already mentioned, it can be very difficult – if not impossible – to get a loan with a bad credit score. That’s because a bad score is usually associated with a riskier borrower in Red Deer who may be more likely to default on loan payments compared to a borrower in Red Deer with good credit (everything you need to know about loan default, here).
Having said that, it’s not impossible to get a loan. While a conventional loan might be off the table, there are alternative loans that bad credit borrowers in Red Deer may be able to secure.
Bad credit loans in Red Deer are geared toward serving borrowers with a poor credit history. The lenders involved in this sphere will place more emphasis on your income, assets, debt load, and most recent payment history to gauge your ability to secure a loan.
Just be aware that even though you stand a much higher chance of getting approved for bad credit loans in Red Deer, the interest rate you will be charged will probably be a lot higher.
Take a look at this infographic to learn more about how bad credit affects your daily life.
What Loans Options Are Available to Those With Bad Credit in Red Deer?
What is available to bad credit borrowers in Red Deer?
Secured loans. Unsecured loans are those that are not backed by any collateral. As such, they are riskier for lenders and usually require a strong credit score and financial profile. But secured loans require some form of collateral to secure the loan.
A valuable asset – such as a car or house – can collateralize a loan, making it a less risky situation for lenders. If you default on the loan, at least the lender has something of value to recover in order to recoup their losses. Secured loans are therefore easier to get approved for.
No-credit check loans. Some lenders are involved in a specific lending sphere that does not require credit checks. This may be an attractive option for borrowers in Red Deer with a bad credit score. Rather than placing a lot of weight on credit scores, these lenders look more closely at income, assets, debt, and recent financial activity.
Look here for more information about loans in Canada with no credit check.
Loan Scams to Watch Out For in Red Deer
While there may be plenty of alternative lenders out there who are legitimately in the business of helping bad credit borrowers, there are also a few that are simply out to scam consumers. Be on the lookout for such predatory lenders, which will display the following signs:
- Loan approval guarantee
- Upfront fees charged
- Insurance required
- Wire transfers required
Boost Your Chances of Loan Approval by Improving Your Credit Score
Bad credit loans in Red Deer provide a great opportunity for bad credit borrowers to get their hands on the money needed from a loan. But aside from that, it may also be a good idea to take steps to improve your credit score, especially if time is on your side.
To give your credit score the boost it needs, consider adopting the following habits:
- Make your payments on time and in full every billing cycle
- Don’t spend any more than 20% to 30% of your credit limit on your credit cards
- Pay your debt down
- Don’t take out too many loans or credit cards within a short time frame
- Keep old credit accounts open
In Need of a Bad Credit Loan in Red Deer?
Do you need a loan but have a bad credit score standing in the way? If so, there may be bad credit loans available to you in Red Deer. The key is to work with a legitimate lender who can provide you with what you need. Call Loans Canada today and we’ll guide you to the right lender who can offer you a much-needed bad credit loan today!
