Bad Credit Doesn’t Have to Ruin Your Life

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Many people have bad credit and are understandably frustrated and stressed out by it. While having bad credit does limit your options, it doesn’t have to ruin your life.

The honest truth is your borrowing options are limited when your credit is bad. With that said, it’s not an impossible task. It is still possible for you to get a loan, rent an apartment, finance a car, and even buy a house – despite having bad credit.

How to Get a Loan with Bad Credit

Several online lenders specialize in offering loans when you have a bad credit score getting in the way. As you should with any loan, be sure to do your research and make sure you fully understand the terms and conditions. Unfortunately there are a lot of scams out there that specifically target people with bad credit.

Another option would be to find a qualified cosigner who can help you get more favorable terms for your loan. But cosigning a loan for someone with bad credit comes with risks. If you do find someone qualified and willing to cosign for you, make sure you are both explicitly clear on the expectations and repayment terms.

Many relationships have been ruined over money issues, which in turn can ruin your life.

Try to limit how much you borrow, as loans for those with less than perfect credit are going to have higher interest rates than it is for those with good credit. But this is good advice for everyone to follow no matter what your interest rate is.

This also means you’ll want to pay back your loan as quickly as possible. Some lenders will work out an installment arrangement at the onset, so again be sure to scrutinize the terms and conditions and ask questions before signing anything.

Related Article: 7 Common Misconceptions About Building a Good Credit Score

How to Rent an Apartment With Bad Credit

Most landlords will check your credit – but not all will. So one obvious option is to rent from someone that doesn’t.

You will have an easier time renting an apartment with bad credit if you have a cosigner – someone who will be responsible for paying the rent if you cannot pay it. Your cosigner will need to have good credit and a stable source of income. And I want to reiterate again, if you do find a cosigner, make sure you are both explicitly clear on the expectations.

Getting a roommate is another option, especially if your roommate has a better credit score then you do. But I realize this not always feasible or desirable.

Letters of recommendations from someone like your employer or previous landlord can also help show you are a responsible adult who can pay their bills on time.

Additionally, you should be prepared to pay extra. You will likely have to pay the first and last’s month’s rent and a security deposit. Some landlords might ask for larger deposits or an additional month’s rent. But there are laws as to what your landlord can legally charge you. So be sure to look into this ahead of time so you aren’t paying any more than you should be.

Related Article: Hate Where You Live? What You Can Do, When You Can’t Move

How to Buy a Car with Bad Credit

Once again, the best way to get approved for financing is with a cosigner. When I bought my first car, my dad cosigned for me. When that car died, my husband and I financed the loan together.

Many car dealerships require the buyer to either have excellent credit or a cosigner. In addition to a down payment.

For those without access to a cosigner, bad credit car dealerships exist to serve your needs. Similar to personal loans for those with bad credit, car loans will have higher interest rates. It’s therefore wise to make as big of a down payment as possible on a vehicle.

Most important of all, however, is choosing a vehicle that is in good enough condition to make it beyond the length of your repayment schedule. Assuming the vehicle is used, consider the reputation of the brand, the mileage, and other factors before making a final decision. Otherwise, you may find yourself underwater (meaning you owe more on your car loan than what the car is worth).

Related Article: How I Was Almost Manipulated Into Buying a New Car

How to Buy a House With Bad Credit

If you want to buy a home with bad credit, you will need to start saving up for a down payment. A larger down payment is required for people who have bad credit. It shows that you are serious and could potentially help you get a better mortgage rate.

But your credit score directly impacts what that mortgage rate is going to be, so you probably won’t get the best rate available.

The good news is that if you work on increasing your credit score and make all your mortgage payments in full and on-time, you should be able to get a better mortgage rate when it comes time for your renewal.

You may also want to apply for a FHA loan if you live in the US, which is backed by the Federal Housing Administration. These types of loans have more lenient requirements. You will not only be able to get a loan with a lower credit score, but you will also be able to make a lower down payment. In fact, you may be able to get a loan with a down payment of 3.5%.

There are also “B lenders” that are financial institutions that work specifically with people with lower credit scores (opposed to the “A lenders” that require better credit scores). Working with a mortgage broker is one option to help you navigate which lender is right for you.

Related Article: Why a Small Home Could Be a Great Investment

Ways to Improve Your Credit Score

It is possible to get a personal loan, car, home or apartment with bad credit. But it’s best for you to work on improving your credit score, so that you never again have to worry if bad credit will ruin your life or not.

Pay your bills on time and make at least the minimum payments required. Consider getting a secured credit card, but keep your credit utilization ratio as low as you can.

Sign up for free credit score and credit report monitoring with places like Credit Karma and Borrowell, and make sure that all of the information on your credit report is correct.

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A bad credit score does not have to ruin your life. You can still get an apartment, loan or credit card with bad credit. However, it is important for you to work on your credit so that you will have a better financial future.

YOUR TURN: What other advice would you give to someone worried that bad credit will ruin their life? Leave a comment and let us know!

Photo by Micah Carlson on Unsplash

Amanda Kay, an Employment Specialist and founder of My Life, I Guess, strives to keep the "person" in personal finance by writing about money, mistakes, and making a living. She focuses on what it’s like being in debt, living paycheck to paycheck, and surviving unemployment while also offering advice and support for others in similar situations - including a FREE library of career & job search resources.

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