The average credit score in Australia is 550; scores below 500 are considered poor, while anything below 400 is considered extremely poor. A poor credit score shows that you have a history of paying your bills and loans late or not paying them at all.
Lenders often impose higher interest rates for loan applicants with poor credit scores, seeing them as higher risk than other applicants. Moreover, some will decline applications with poor credit scores. As a result, seeking out bad credit loans is the ideal option for people who need cash urgently but have poor credit scores.
Here are a few tips on how to improve your chance of getting approved on a no-credit-check loan:
Show Proof of Income
Most lenders look into your credit score when evaluating your loan application, but some consider other factors. Therefore, you may still qualify for a loan even if you have a poor credit score, but the lenders will try to establish if you can make the loan payment on time.
They can do that by requesting you to provide your payslip. But if you’re unemployed, you need to prove that you’ve another reliable source of income like business or reliable investments. This will give them confidence that you will repay the loan on time.
They would also want to assess your debt-to-income ratio (DTI), the portion of your monthly earnings that goes to repaying your debts. Most lenders require a DTI of 40% or less; the lower, the better.
1. Put Up Collateral
Putting up collateral is another strategy you can use to boost your chances of getting a no-credit-check loans loan. Using your home or any other valuable asset as collateral makes you a low-risk borrower.
Lenders would be more willing to accept applicants with collateral even if their credit scores are poor. Putting up collateral might be a good idea if you need a large sum of money. Moreover, you could even negotiate a lower interest rate and a more extended repayment period.
However, if you fail to make your payments, lenders may be able to recoup their losses by selling or auctioning your assets.
2. Apply With a Co-signer
Using a co-signer is another excellent idea for improving your loan approval chances when you have a poor credit score. However, some lenders don’t allow co-signing in their loan applications, so ensure you check out different lenders.
You can pick a friend or family member with a reliable income or an excellent credit score for a co-signer. By signing as your co-signer, they’ll accept the responsibility to pay off your loan if you default.
3. Work With the Right Lender
Although loan lenders have different ways of assessing loan applications, getting a loan can be challenging if you have a bad credit history. Luckily, some lenders do not check credit history and only care if the applicant can repay the loan when it’s due.
If you’re looking for ways to improve your chances of getting a bad credit loan, ensure you seek loans from suitable lenders. Gday Loans, for example, connects their clients with direct lenders who offer no credit check loans.
Improve Your Credit Score
Improving your credit score is the best way to boost your chances of getting a loan. But building a credit score may take time.
So what if you have an emergency and need it after a short period?
You can follow these steps if you can’t wait for the normal process of boosting your credit score and improving your chances of securing a loan:
- Exceed the minimum monthly payment of your credit balance
- Pay all your past-debts
- Create different credit accounts
- Seek loans from lenders offering no credit check loans
- Pay up your current debts and bills
- Confirm if your credit report has an error
The Bottom Line
You can still receive a loan even if you have a poor credit score, as long as you know and research all your opportunities. Keep in mind that there are many factors a lender may use to decide whether or not to give you a loan besides your credit score.