Did you know that sixty-eight million people have bad credit scores? Unfortunately, low credit scores can make your life difficult in a lot of ways. They can make it challenging to apply for mortgages, credit cards, and other types of loans with bad credit. It's tough to take advantage of a line of credit with a poor credit score, but it's not impossible.

All you need to do is know is where to look for suitable lenders. We'll walk you through how to secure a line of credit when you have no credit or your score is low. Let's get started!

What is a Line of Credit?

A line of credit is an option that allows you to access the amount of cash that you need. When it comes time to pay, you only owe interest in the amount you borrow. Many different lenders utilize this type of lending option since it often works as a flexible loan.

Once you withdraw money from your account, you can either pay it back immediately or extend it out over a specified period. This type of lending option is often more sought after than credit cards since it gives you access to funds when you need them without applying for a loan.

Make sure to read our line of credit FAQs for more details. If you need cash for an emergency, you can easily access funds. However, like credit cards, a line of credit does require monthly payments.

How to Get a Line of Credit with Poor Credit

So, you found out you have a bad credit score. The good news is that this isn't the end of the world. It's still possible to get different types of lines of credit even if your score isn't great. In this section, we'll walk you through on how to do it.

1. Review your income and other debts

Before applying for a line of credit, it's crucial to have a clear understanding of your current financial situation. Take some time to review your income and expenses, including any outstanding debts. This will give you a realistic picture of how much you can afford to borrow and repay.

2. Understand the costs: Calculate your monthly payments

Knowing the costs associated with a line of credit is crucial in managing your finances effectively. Use a loan calculator to determine your estimated monthly payments based on the desired credit limit and repayment terms. This will help you evaluate whether you can comfortably afford the payments and avoid unnecessary financial strain.

3. Compare bad credit lenders and get prequalified

When you have poor credit, it's important to explore lenders who specialize in providing credit to individuals in similar situations. Research and compare different lenders, focusing on their interest rates, fees, and repayment terms. Getting prequalified can help you assess your chances of approval and choose the most favorable terms available.

4. Gather necessary loan documents

To apply for a line of credit, you'll need to gather specific documents that lenders typically require. These may include proof of income, bank statements, identification documents, and any other relevant financial information. Having these documents readily available will expedite the application process and increase your chances of approval.

5. Submit a loan application

Once you have selected a suitable lender and assembled the necessary documents, it's time to submit your loan application. Be sure to fill out the application accurately, providing all required information. Double-check your application before submitting it to ensure it is complete and error-free.

6. Receive your Line of Credit

After submitting your application, the lender will assess your eligibility and determine the amount of credit they will extend to you. If approved, you will receive your line of credit, allowing you to access funds as needed. Remember to use your line of credit responsibly and make your payments on time to rebuild your credit.

What is Considered a Bad Credit Score?

The first thing you should check when looking for a line of credit is your credit score. A credit score is a rating that lenders use to determine whether you're a reliable borrower. These ratings are typically determined by FICO, or the Fair Isaac Corporation, model of scoring. If you have a low credit score, then it likely means that you miss payments often.

So, what factors affect a credit score? A credit score is split into a variety of areas, each with its percentages. For example, 35% of your credit score is based on your payment history on past credit. FICO considers 30% of the score by the amount you owe, and your credit history's length makes up 15%.

The final 20% is divided between the amount of new credit you have and the amount of existing credit. When all of these factors are tallied up, you get a score. The range of scores fall into these categories:

• 800 to 850 is an excellent credit score
• 740 to 799 is a very good credit score
• 670 to 739 is a good credit score
• 580 to 669 is a fair credit score
• 300 to 579 is a poor credit score

Generally, fair and poor credit scores are in the bad range of credit score rankings. If you want to learn more about your credit score and how it works, then make sure to check out this resource here.

Secured Line of Credit Vs. Unsecured Line of Credit

There are two popular types of lines of credit: secured and unsecured. Secured lines of credit provide the lender with a lien to an asset that the borrower owns. That means that if the borrower defaults on payments, then the lender can seize this asset. Often this collateral comes in the form of a home or a car.

Secured credit is easy to get, and the interest rates are lower. However, if you aren't able to make payments, then it can backfire on you. Lenders who issue unsecured lines of credit, on the other hand, can't seize your assets if you default on payments.

Because of this, unsecured lines of credit are riskier for lenders. As such, they often have higher interest rates.

Have You Been Denied a Line of Credit? Contact CASH 1

We hope this article helped give you some tips on securing a line of credit for poor credit. As you can see, it's by no means impossible to secure credit when you're credit history isn't great. Unfortunately, it will take a little more work to find a lender that's willing to take a bad credit line of credit.

Most of the time, a bank isn't likely to approve you for a line of credit if you have poor credit. Luckily, the bank isn't the only option. Direct online lenders like CASH 1 have higher approval rates. We fund your loan directly. Apply online if you live in Idaho, Kansas, Missouri, or Utah.

For over two decades, CASH 1 has been helping our communities get the financial help they deserve. If you're interested in exploring your options, make sure to get in touch with us today.