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 Ranking Services: There are three big credit ranking services out there: TransUnion, Equifax, and Experian. Each has its own formula for developing what’s called a “FICO score.” What’s known is that scores from the three usually are within twelve or so points of each other, most of the time. Additionally, scores are generated using several different inputs.
Giving Loans to People With Bad Credit: There are many lenders out there who specialize in people who may have bad credit scores. Known, as “sub-prime lenders,” they’re able to many times give a loan when most traditional lenders can’t or won’t. But, their loans can cost more, in terms of interest. Still, people of high character but poor credit, for one reason or another, may need to use these lenders. This is especially true in tough times.
Sub-Prime Lending Rates: Also called, “sub-prime lenders,” these people or companies have to pay more for the same money they lend to you. As a result, typical interest rates go from several points above the normal prime lending rate to just under maximum lending rates as set by law. It’s always best to check with a few of these sub-prime lenders to see if you can get a better deal.
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.
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