debt

3 ways to overcome bad credit

Bad credit can derail your life plans, whether they include getting a car loan or a new apartment. However, there are strategies that may help you achieve your goals even with a subpar credit score.

Increase your down payment. Most loans require a down payment from 20 percent on a house to a few thousand dollars on a car. If you can increase the typical down payment by doubling or tripling the usual requirement, you'll show the loan officer that you're serious about your offer.

"People expect all lenders to be the same, and they really aren't," says Liz Pulliam Weston, MSN Money columnist and author of "Your Credit Score." "If your scores are low, but you have a bigger down payment, you might still be able to qualify." The same is true with rental deposits. If you have bad credit, landlords may reconsider you if you provide three or four months' rent upfront.

Explain yourself. If you have a black mark on your credit report like an unexpected medical crisis that stretched your bill-paying ability, which clouds your capacity to pay off your debt, you can share the details on your credit report, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling in Silver Spring, Md. "You can attach a 100-word explanation to your credit file that goes out with each credit inquiry, and some lenders might take that into consideration," she says.

Find a co-signer. Your lender might stonewall you over your bad credit. But if you have a relative with good credit, get that person to co-sign a loan or a credit card application. That will instantly boost your credibility with the lender. Be sure you can pay your debts, or you might ruin your credit and your friendship with your co-signer.

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