Can You Obtain a Loan with Low Credit?
If your credit score isn’t as high as you would like it to be, it can often be difficult to obtain credit when you need it. What’s more, applying and being denied can weaken your ability to get credit even more in the future. Here’s how it works:
What Is an Enquiry?
When you apply for credit, the lender will likely check your credit score. This is what is known as an enquiry. Every time you apply for credit, an enquiry will be added to your credit file so that other lenders can see that you have been applying for credit recently. All enquiries, whether approved or rejected, will stay on your credit report for five years.
How Do Too Many Enquiries Hurt Your Credit?
When you have multiple enquiries in your credit file, it raises a red flag for lenders. If you are actively seeking out new credit, it may signal that your financial situation has changed and that you are short on cash. In this scenario, you are unlikely to be able to make your repayments so lenders will be reluctant to work with you. Even if this is not the case in your situation, it is what it will look like to lenders, so it is important to be aware of this.
Will Every Lender Check Your Score?
Not all lenders will require a credit check before issuing you credit. However, those who offer loans without a credit check are typically not the most reputable of lenders. They are much more likely to charge you exorbitant interest rates, which can make it incredibly difficult for you to repay the loan.
What Can You Do to Obtain Credit if Your Score Is Low?
If your credit score is on the lower side, you may still be able to obtain credit. As mentioned above, there are lenders who will give you credit without a credit enquiry. However, they may engage in predatory lending practices that you would do well to steer clear of. If you have parents or other loved ones who can vouch for you, you may be able to get credit by using them as a co-signer on your application. This can give the lender greater confidence that they will get their money back, as your co-signer will be responsible for making the repayments if you cannot. Keep in mind, though, that it is not always a good idea to mix money with family or friendships.