One of the most common questions I get as a financial adviser is this: “I have bad credit — can I still get a loan?”
It’s usually asked with a lot of hesitation, as if the answer is going to be a flat “no.” But the truth is, getting a loan with a low credit score is definitely possible — you just need to be a little more strategic, a little more prepared, and very realistic about the options available.
Over the years, I’ve worked with clients across the credit spectrum — from those recovering from bankruptcy to young people just starting out with no credit history at all. I’ve seen people with low scores get car loans, personal loans, even mortgages. But I’ve also seen others fall into traps that made things worse.
So if you’re sitting with a score in the 500s or low 600s, here’s how I walk clients through the loan process — not from a textbook, but from real conversations and outcomes.
Understand Why Your Score Is Low
Before applying for a loan, take a deep breath and look at your credit report. This isn’t just a box-checking step. It tells you what lenders will see when they assess your application. Is it missed payments? Maxed-out cards? Too many new accounts? Or something simple, like a lack of credit history?
Once you know the “why,” you can work around it — or at least explain it. I’ve had clients with low scores due to medical bills or one-time emergencies. When they wrote a short note of explanation with their application, it helped the lender understand the situation beyond just the number.
Focus on Lenders That Work with Poor Credit
Not all lenders treat credit the same. Traditional banks often have strict credit score cutoffs. But online lenders, credit unions, and community banks tend to be more flexible. Some specialize in working with borrowers who have less-than-perfect credit.
There are also secured loan options — like using a car title, savings account, or certificate of deposit as collateral — which reduces the lender’s risk and improves your approval chances.
A few of my clients had success with credit builder loans from credit unions. These aren’t large loans — usually a few hundred to a couple thousand dollars — but they help show repayment history, which can eventually boost your score.
Show Your Income and Stability Clearly
When your credit score doesn’t speak in your favor, your income and stability become your biggest selling points. Lenders want to know: Can you pay this back, and can we trust that you will?
This is where you stack the deck in your favor:
- Provide proof of steady income through pay stubs or tax returns
- Highlight your job tenure if you’ve been in a role for a while
- Share monthly budget details showing how you’ll make room for loan payments
I always recommend including a short personal statement with your application. Nothing dramatic — just a simple explanation of your financial situation, your repayment plan, and your current stability.
Consider a Co-Signer — But Be Honest About the Risks
If you have someone in your life with better credit — a parent, sibling, or trusted friend — you may be able to apply with a co-signer. This can significantly increase your chances of approval and lower your interest rate.
But it’s a big ask. That person becomes legally responsible for your loan. If you miss payments, it hurts their credit too. Only go down this road if you’re fully confident you’ll make every payment on time, and make sure your co-signer understands the risks.
Prepare for Higher Interest Rates
Even if you do get approved, you’ll likely be offered a higher interest rate than someone with good credit. That’s the cost of risk from the lender’s perspective.
What matters most is understanding the total cost of the loan — not just the monthly payment. Ask:
- What’s the APR (not just the interest rate)?
- Are there prepayment penalties?
- Are there fees hidden in the fine print?
I always tell my clients: Don’t let desperation lead you into an expensive mistake. A bad loan is worse than no loan at all.
Small Steps First, Then Bigger Loans Later
If you’re getting turned down for large loans, start smaller. A credit builder loan, secured card, or small personal loan (even $500) that you repay reliably can help rebuild your profile.
A client of mine once got denied for a $5,000 loan. She went back and got approved for a $1,000 secured personal loan from a local credit union. She paid it off in 6 months. Within a year, her credit score had jumped 60 points, and she qualified for the original amount she needed — at a much better rate.
Final Thoughts
Getting a loan with a low credit score isn’t impossible. But it does require effort, patience, and a clear understanding of your options. Don’t let your score define you — lenders look at more than just that number.
Be honest, be prepared, and don’t jump into anything just because you feel pressured. Take the time to find a loan that works for you, not one that traps you in deeper debt.