Understanding And Surviving A Low Credit Score

If you listen to the financial industry’s propaganda, you might believe that having a low credit score means you will end up sleeping under a bridge and foraging for food in garbage cans. Nothing could be further from the truth. It’s fairly easy to live with a poor or even a bad credit score; in fact, tens of millions of Americans are doing it. And guess what? The vast majority of those people have homes, cars, jobs, and washing machines, just like the rest of us.

This doesn’t mean that a credit score isn’t important. It just means that a low credit score is not the end of the world. It also means that you should think twice before making financial decisions based purely on your credit score. Make decisions for the good of your family, not to raise a magic number

What Is A Credit Score Anyway, And What Does It Really Mean?

On paper, your credit score is a number that is supposed to be able to predict your ability or willingness to repay loans and other debts. In reality, it is nothing but a record of information about you that banks and other financial institutions provide to the big three credit bureaus. The information is not checked for accuracy, and it doesn’t reflect how much money you have or make.

The score is a ratio based on the number of complaints that creditors make about you. The more complaints, the lower the score and the harder time you might have getting credit. Generally, lenders use a lower score as a reason to raise interest rates and sometimes to deny loans.

Now here’s something you might not realize: there is nothing legally obligating or binding about the credit score. There’s no law that requires any lender anywhere to look at it or base loan decisions on it. Most lenders do, but some do not.

Getting Credit And Loans With A Low Credit Score

What this basically means is that a person with a low credit score who is willing to shop around and pay a higher interest rate can get virtually any financial product: mortgages, car loans, personal loans, credit cards, etc. There are many lenders that actually specialize in lending to such people because they know that they can charge them higher interest rates.

Here are some tips for getting a loan or mortgage with a lower credit score:

• Deal with smaller lenders or mortgage brokers, since they are more likely to do business with a person with a low credit score.
• Be willing to put up a large cash down payment. Many lenders will ignore the credit score if they see the cash.
• Be honest. Come right out and tell lenders that your credit score stinks. Then ask if they are willing to deal with you and what they can do for you.
• Make sure you have a proof of income, such as a bank statement or a record of your salary, when you apply for a loan. Some lenders will be more interested in this than a credit score.
• Get a co-signer with good credit to sign off on the loan.
• Be willing to put up collateral.

Renting a Home with a Bad Credit Score

Sadly enough, a person with a low credit score can often have an easier time buying a new Mercedes than renting an apartment. Many landlords now base the decision on whether to rent to some or not based on a credit score. Here are some tips in renting a house or an apartment with a bad credit score.

• Deal with individual landlords that own and manage the property themselves rather than corporate-owned apartments or property management companies. Individual owners will be more likely to rent to somebody with a low credit score.
• Bring proof of your income, such as a bank statement or a paycheck, when you go to rent a home.
• Be willing to put up a larger deposit, or more than the first and second months of rent, if you can afford it.
• Be honest. Come out and tell the landlord that your credit is lousy.
• Be flexible. Offer to pay a slightly higher rent each month or do some work, such as home repairs or snow shoveling, for the landlord.
• Get a roommate with a good credit score. That way, the rent will be in that person’s name, even if you’re paying it.
• Use networking to find a place to live. Ask everybody you know if they know of a place. Don’t be afraid to use established connections, such as church, work, friends, and relatives. Many landlords will overlook a poor credit score if somebody they know vouches for a potential renter.
• Broaden your search. Try looking for places to rent in less desirable areas, such as industrial areas or areas traditionally rented to students. Be willing to put up with a slightly smaller place or some lack of amenities.
• Exploit vacancies. If you see that a place has been sitting empty for some time, approach the owner or manager and say you’re willing to move in right away. Empty apartments and homes don’t earn them any money. Remember, a landlord still has to pay taxes and utility bills on an empty unit.

Getting A Job With A Low Credit Score

The first thing you should do if you’re job hunting with a low credit score is to check your state’s laws. Some states have laws that bar employers from using credit scores for applicants for most jobs. If there’s such a law in your state, remind employers of it and be willing to complain to the state government if they ask for a credit report.

The next is to simply not bring the credit score issue up unless the employer asks. Most would-be employers won’t run a credit score because it costs money. Those that do will only run one if they’re serious about calling you in for a second interview. If that happens, simply explain to them that your credit score is poor. Then see how they react; if you’re the best candidate for the job, they might overlook it.

Finally, be willing to create your job by starting a business or freelancing. Freelancers don’t have to worry about credit scores; instead, they are hired based on performance. Customers don’t care about your credit score either.

Just Say No to Credit Cards

The best advice concerning credit cards for a person with a low credit score is to forget them. Learn to live without credit cards by paying cash or using a debit card for transactions.

There are now several excellent debit cards available for persons with low credit scores that offer most of the features of credit cards, including online bill pay and direct deposit of paychecks. Anybody can get a Bluebird or Account Now MasterCard or Visa without a credit score. Many banks will also issue a straight debit card that lets you withdraw money from your checking account. The advantage to these products is that the only money you spend with them is the funds in your account. Unlike a credit card, you can’t spend what you don’t have.

Learning how to live without credit cards and other financial products is the best way to free yourself and your family from the financial industry. If you can do that, you will no longer be bound by imaginary limitations, such as credit scores. Avoiding the financial industry and its products is the first step on the road to self-sufficiency.

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