Finding a Lender when you have Bad Credit

For personal financial management:

First of all, let’s go over the basic of financial management. During our lifetime, some of us will once or twice incur debts due to extenuating circumstances. Yet, prior to getting ourselves into that ditch, most of us are clueless how the financial world works. Here are some few basics:

Lending options:
1. Credit cards with high APR and ridiculous miscellaneous fees.
2. Credit unions with relatively lower interest rate, but required membership in an association.
3. Financial institution loans that required collateral such as your local bank.
4. Equity loans taken out of your real estate.
5. Cash values loan from life insurance policies.
(There could be more…)

What factors affect your credit score?
According to its August 2007 edition, Money magazine ( reveals the “secret ingredient” to credit usage and factors consumer can manipulate to improve credit score. In order of importance, they are as follow:

1. Timely bill payments
2. Low revolving balances
3. Length of credit lines
4. Number of credit inquiries: type and frequency
5. Number of credit cards opened: type and balance

Per the article, 40% of our credit score is effected by payment history, 30% by outstanding debt, 15% due to length of credit history, 10% by pursuit of new credit,and 5% to credit mix.

For someone with bad credit, out of the above, one factor he/she can influence the most is payment history. Prior to refinancing or inquiring for a new loan, apply the following tips:

1. Consolidate outstanding revolving balances.
2. Make prompt payments for six months, even if that means only the minimum amount.
3. Obtain your credit score from three credit bureaus (Experian, TransUnion, and Equifax). *Annually, consumer is entitled to 1 free credit report* Find out why your credit score is low; normally the credit report will highlight reasons to fix.
4. Transfer outstanding debts into available credit lines with the least APR.

Another option to consider:
Although tradition venues are popular in the financial world, now a day, we have alternative: people-to-people lending service such as Prosper ( offer attractive variable rates for lenders and borrowers. Prosper even have endorsements from group affiliations and rated credit score gathered from several criteria. This is worth a research if many lenders turned you down.

Preventive measure:
Bad credit score affects consumer in many ways from employment to insurance rate. It is always wise to manage one’s finance responsibly. There many financial management classes (on-line and off-line) and budgeting tools available for counsel. If necessary, talk to a financial adviser to help plan your goals.