Having a low credit score doesn't necessarily mean you can't access credit. However, interest rates can be very high if lenders regard you as a high risk borrower. Here are three tips that can help you get a car loan or other financing with a reasonable rate of interest, even if your credit score isn't as high as it should be.
1. Choose Secured Over Unsecured Credit
Loans that are backed up by an asset, such as mortgages and car loans, often have much lower interest rates than unsecured personal loans. Therefore, refinancing your car or even remortgaging your home can be a good way to get your hands on the cash you need. Of course, you'll need to remember to keep up with the loan repayments to protect your asset, but the advantage is that the overall amount you end up repaying could be much lower when you secure your loan against an asset that you own.
2. Use a Co-Signer
The banks may not believe that you will repay your debts, but you probably have family members who are willing to vouch for you. Getting a trusted relative or friend to co-sign on your loan can persuade lenders to let you access credit, even if your credit history is less than perfect. The best co-signers are those who have significant assets of their own, such as an unmortgaged home, as well as a steady income. Remember that your co-signer will be responsible for repaying the loan if you can't make the payments, so you need to be sure that you have a plan for repaying the loan to avoid leaving them in a bad situation.
3. Improve Your Credit Score
If you don't need the money immediately, then spending some time improving your credit score can help you to get a loan that isn't too expensive. The first step is to take a look at your credit history, so you can work out where you have been going wrong so far. To access your credit report, you'll need to contact one of the national credit reporting bodies: Veda, D&B or Experian. Take the time to read the report and understand how late payments and loan defaults have lowered your score, then take action to repair the damage. One good way to build credit history is to take out a pre-paid credit card and regularly use it to pay for small purchases, such as groceries.