Good credit is gold these days. But for some, that A+ rating is elusive. You can’t get credit without good credit and you can’t build good credit unless someone gives you a chance. But don’t give up. There are several solid ways to snag the cash you need.
“Your credit report and credit score are like your report cards for how you deal with money,” Tiffany “the Budgetnista” Aliche says. “It’s like trying to get into a really good school and you’ve gotten Ds and Fs. The school has nothing to go on besides your report card. Fortunately, there are some places that will work with you.”
Aliche suggests the following ideas if you need money and you have bad credit:
Know your credit score. Chances are you know your score if you’ve been denied a loan. If not, check it out for free at Annualcreditreport.com.
Try your credit union. Credit unions are usually nonprofit, member-based organizations that are not as strict as many commercial banks when it comes to lending money. Their focus is serving the needs of their members; however, you’ll need to open an account before asking to borrow money.
Obtain a secured credit card. Secured credit cards, which are like credit cards with training wheels, can help you to raise your credit score. Lenders require a minimum deposit, usually of several hundred dollars. They will then give you a card with the limit for the amount of your deposit or some percentage above that, and you can use it like a credit card and pay it off monthly. If you fail to pay it off, lenders are not worried because they already have your deposit as collateral. If you do well after six months to a year, some banks will convert the card to an unsecured one. Urban Partnership Bank in Chicago is among the many banks offering this option for those looking to build or reestablish a credit history.
Go to family and friends. No one knows and trusts you more than family and friends, so if you aren’t facing burned bridges, start with them to see if they will lend you money. Be sure to set up an agreement to repay the loan—and then honor that agreement.
Ask for an advance on your paycheck. If your beleaguered credit isn’t the result of unemployment, consider asking your employer for an advance on your paycheck, particularly if you have been on the job for a while. (This tactic is not recommended if you are a new employee.)
Ask the Internet. Some people have had success raising money to pay off debts by creating a crowdfunding donation page through websites such as GoFundMe.
Avoid payday loans. Aliche says payday loans should be avoided like the plague because the interest rates are so onerous. They are banned in 15 states and the District of Columbia. Other states have laws governing payday lending. Credit cards and store cards may charge you rates upward of 20 percent, which is high enough. However, “the interest rate on some payday loans is 400 percent. Some are upward of 700 percent. The purpose of these loans is to get you locked into a cycle, where you are paying but never paying off. They are predatory lenders who prey on the weakest financial sector of our population that has the least amount of financial knowledge and literacy. Warren Buffett doesn’t even make 400 percent interest off of his investments.”
In the end, Aliche says it’s important to be mindful of these points when trying to rebuild and obtain credit. And don’t give up hope.
We have one more piece of advice: Many community banks are interested in giving you a second chance after your credit is damaged. Visit one in your area and see if it has an offering that is for you. One such bank, Urban Partnership Bank in Chicago, posted its own advice for building a strong credit record.