A look at Bad Credit Lenders
In a tough economic world, sometimes there's a need for a bad credit lender. But, who out there really knows what constitutes bad credit lending? Also, what's the standard for "bad" credit? Most major credit bureau standards vary slightly, but all are pretty close. For the most part, you have to have a 499 or lower score as based on Fair Isaac Credit Organization (FICO) standards to have bad credit.
Credit Reporting Bureaus: All three of the major bureaus (Experian, Equifax and TransUnion) have their own methods for generating a "FICO score" (pronounced "Fy-Koh"). Yet most of the time, all of them are within a dozen or so points of each other. These bureaus also take a lot of factors into account when it comes good or bad credit.
Bad Credit Lenders: The preferred name for bad credit lenders is "sub-prime lenders." Lenders of this sort are more willing to take a chance on an auto or other type of loan to somebody with so-called "challenged credit." And because bad credit can sometimes happen to good people, they may get a lot of business in tough economic times.
Varying Lending Rates: Because the risk to the lender is greater, the interest rates on these loans can be higher. Sometimes by a lot, as illustrated by loans that go right to the interest limits set by law. You should check around, though, to see if one of these sub-prime lenders will offer a better rate before signing any loans.
Beware Loan-Shark Lending: Sub-prime lending serves a useful purpose, especially when truly good people fall on poor credit issues. Some probably have nobody else to turn to in tight credit markets. It's best to keep an eye out, though, for lending which resembles loan sharking in appearance. By this, we mean tacking on double surcharges, extending the life of the loan without permission, and funny service charges, for example.
Credit Reporting Bureaus: All three of the major bureaus (Experian, Equifax and TransUnion) have their own methods for generating a "FICO score" (pronounced "Fy-Koh"). Yet most of the time, all of them are within a dozen or so points of each other. These bureaus also take a lot of factors into account when it comes good or bad credit.
Bad Credit Lenders: The preferred name for bad credit lenders is "sub-prime lenders." Lenders of this sort are more willing to take a chance on an auto or other type of loan to somebody with so-called "challenged credit." And because bad credit can sometimes happen to good people, they may get a lot of business in tough economic times.
Varying Lending Rates: Because the risk to the lender is greater, the interest rates on these loans can be higher. Sometimes by a lot, as illustrated by loans that go right to the interest limits set by law. You should check around, though, to see if one of these sub-prime lenders will offer a better rate before signing any loans.
Beware Loan-Shark Lending: Sub-prime lending serves a useful purpose, especially when truly good people fall on poor credit issues. Some probably have nobody else to turn to in tight credit markets. It's best to keep an eye out, though, for lending which resembles loan sharking in appearance. By this, we mean tacking on double surcharges, extending the life of the loan without permission, and funny service charges, for example.
About the Author:
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posted by Credit Counseling at
2:40 AM
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