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Getting a Loan if You Have Bad Credit

Written by

Rubina Ahmed-Haq is a Journalist and Personal Finance Expert. She regularly appears on CBC Radio, CBC News Network, CTV Your Morning and Global Toronto. She writes for Homes Publishing group,

Rubina Ahmed-Haq
There are options to getting a loan, even if you have bad credit

Having a bad credit history can restrict your chances of securing a loan at a low rate. Banks don’t only look at your income. They’ll also check your credit history, and assets and your other liabilities before offering you a loan.

Bad credit history and a low credit score can happen to the best of us. A few missed payments and a maxed-out credit card can impact your score and make you look like a risk to lenders.

But maybe you’re starting to get your finances on track and are confident you can carry a loan. Then, there are a few things you can do to secure credit even if your history is bad.

Start making minimum payments

The best way to improve your chances of getting a loan with a bad credit history is to show you are taking steps to improve your situation. This means making regular payments on all your debt obligations. You should focus on paying down your most expensive debt first, such as a credit card, or an unsecured line of credit while still servicing all your other loans.

Call your creditors

Pick up the phone and call whoever you owe money to. The gas company, the municipal tax department, your credit card, even an unpaid parking ticket. Talk with them about a solution for how you can get your debt paid off. They may have loan forgiveness or a payment program for those who are struggling. Once you make the call you can save yourself from having your credit score affected further, as your payments will no longer be considered late.

Show income

Getting a loan on bad credit is possible – if you can show you have a steady income. But many of the easiest options are expensive and often prey on those who have no other credit options. Stay away from instant loans or payday loans as their borrowing costs are high. Instead, talk to your bank about how you can apply for an unsecured line of credit. There is no collateral required for these loans. Many banks offer loans of up to $5000 on an unsecured line of credit. The interest rate is based on prime plus a percentage and does fluctuate as prime does. These are revolving loans. You only pay interest on the money you borrow, and you can pay it back as fast as you want and can.

Find someone who will co-sign

If your bad credit history is becoming a barrier to you taking out a loan or renting an apartment, talk to a friend or family member that would be willing to co-sign. Having someone with good credit co-sign can guarantee your loan will make access to credit easier. Be careful, though, if you fail to make your rent or are late making a loan payment it will affect your co-signers credit rating. Be confident you have the ability to make the loan payments before you go into a co-sign situation.  In this case, it’s more than your credit history that can be ruined if you don’t stay on track. You risk souring your relationship, too. 

Stay on the road to good credit

According to the Government of Ontario website, the only way to improve a poor credit rating is to pay your debts and allow time to pass to show that your payment habits have improved. Here are some of their tips to help clear your bad credit history.

  • Always pay your bills on time. If you have a reason for being late with your payment, let the company know.
  • Don’t go over your credit card limit.
  • Don’t apply for credit too often.
  • Understand the total cost of everything you buy and add up the monthly charges.

Having bad credit doesn’t mean you can’t secure a loan but you may have to settle for a higher rate and sticker conditions. Be prepared for that and in the meantime work on improving your bad credit reputation.

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