Understanding Bad Credit Lenders
What if you need a bad credit lender? Do you know what one is, or what kind of credit is "bad", in the first place? Well, for starters, standards for what constitutes bad credit can vary from credit bureau to credit bureau. It's generally accepted, though, that credit is deemed bad when it sinks below a 500 score as ranked by the Fair Issac Credit Organization (FICO).
Credit Reporting Bureaus: All three of the major bureaus (Experian, Equifax and TransUnion) have their own methods for generating a "FICO score" (pronounced "Fy-Koh"). Yet most of the time, all of them are within a dozen or so points of each other. These bureaus also take a lot of factors into account when it comes good or bad credit.
Giving Loans to People With Bad Credit: There are many lenders out there who specialize in people who may have bad credit scores. Known, as "sub-prime lenders," they're able to many times give a loan when most traditional lenders can't or won't. But, their loans can cost more, in terms of interest. Still, people of high character but poor credit, for one reason or another, may need to use these lenders. This is especially true in tough times.
Lender Interest Rates: Because these kinds of lenders deal in sub-prime finance markets, the cost of the money they may lend to you is going to be more dear. Interest rates can range from only a few points above prime to near the legal interest limit. If you think you're going to need a high-interest, "bad credit" loan, do some research before you get on.
Watch Out for Predatory Lending: Bad credit lending as a practice definitely has its place at the financing table. After all, some truly good people get caught up in bad circumstances and have nowhere else to go. Be careful, that you don't fall victim to predatory lending such as exorbitant late fees, huge down payments, suspicious or nonexistent "service charges," and the like.
Credit Reporting Bureaus: All three of the major bureaus (Experian, Equifax and TransUnion) have their own methods for generating a "FICO score" (pronounced "Fy-Koh"). Yet most of the time, all of them are within a dozen or so points of each other. These bureaus also take a lot of factors into account when it comes good or bad credit.
Giving Loans to People With Bad Credit: There are many lenders out there who specialize in people who may have bad credit scores. Known, as "sub-prime lenders," they're able to many times give a loan when most traditional lenders can't or won't. But, their loans can cost more, in terms of interest. Still, people of high character but poor credit, for one reason or another, may need to use these lenders. This is especially true in tough times.
Lender Interest Rates: Because these kinds of lenders deal in sub-prime finance markets, the cost of the money they may lend to you is going to be more dear. Interest rates can range from only a few points above prime to near the legal interest limit. If you think you're going to need a high-interest, "bad credit" loan, do some research before you get on.
Watch Out for Predatory Lending: Bad credit lending as a practice definitely has its place at the financing table. After all, some truly good people get caught up in bad circumstances and have nowhere else to go. Be careful, that you don't fall victim to predatory lending such as exorbitant late fees, huge down payments, suspicious or nonexistent "service charges," and the like.
About the Author:
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posted by Credit Counseling at
7:17 PM
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