Looking for high risk loans and credit cards for people with bad credit?  There are a few things you should know when applying for loans or credit cards if you have bad credit.  I’ll go over them in this article so you can be better prepared while applying for either a loan or a credit card.

The first thing to be aware of is that in today’s credit score driven financial world there unfortunately are penalties for having bad credit.  If you do get approved for a loan or credit card you will pay a higher interest rate than someone who has good credit.  You also may be required to provide collateral for the loan or get a “secured” credit card.  We’ll go over what this means in more detail below.

Loan Application Guidelines:

Gather all of your financial information – This is more important the worse your credit is.  You’ll want to gather the following items, at a minimum:

    • Identification – Social Security card, driver’s license, passport for  start.  The more the better.  You may not need them all, but you definitely want to have everything you need handy to make the application process easier.
    • Last several paystubs – This shows that you’re earning a regular income, which is important because it shows the lender that you have the ability to repay the loan.
    • Credit scores from the 3 major credit bureaus – Be sure you know what your score is from each of the three; Transunion, Equifax and Experian.  The bank or credit card company is going to pull this information, so you want to be sure that you’re fully aware of what your scores are.
    • Bank/Investment Statements – This is especially important for a loan where you’ll be using some sort of down payment.  The lender will want to see that money in your bank account and want to understand where that money came from.  For example, in a mortgage for purchasing a home, they want to see that the money is the result of your savings rather than borrowing the money from somewhere else.  They don’t want you using borrowed money for the down payment.

    Shop Around – Not all lenders are created equal and the rates and loan terms they offer will differ.  Do not just settle for the first one you look at, shop around and be sure that you’re getting the best possible rate you can get.  This can save you hundreds, if not thousands, of dollars in interest over the life of the loan.

    Be Assertive – Stick up for yourself!  You deserve this loan just as much as someone with good credit, you’ve just had some tough times in the past that have hurt your credit score.  Explain the situation and be calm and confident.  It goes a long way.

      Credit Cards:

      There are many options available for credit cards if you have bad credit.  I’ll explain the most common here.

      • Secured – A secured credit card usually means that you need to put down some sort of security deposit when you get the card.  Typically, this deposit gets you an initial lower credit limit, for example $3000.  As you make payments and improve your credit your credit limit will increase and eventually they will refund your deposit back to you.  This can be a great tool to start rebuilding your credit.
      • Prepaid – The second most common option.  You deposit money into the card account, either via a one-time deposit or most allow you to set up direct deposit from your paycheck directly to the card.  Then as you use the card responsibly it helps rebuild your credit score, which can lead to being able to get a traditional credit card.

      The best way to use either the bad credit loans or credit cards is to rebuild your credit score as quickly as possible.  Make your payments on time and use the cards responsibly and over time your score will improve.  Once it’s improved enough you can stop using the high interest cards or refinance the higher interest loans and get something more reasonable.  This then makes it even easier to continue to make the payments and your credit score continues to improve.  Use these strategies for high risk loans and credit cards for people with bad credit and soon your bad credit will just be a distant memory.