What to Do When You Need to Make a Big Purchase but Have Bad Credit

Good credit history is crucial for the approval of your loan application and for better interest rates, both of which are critical when making a major purchase like a car or home. Even with a good income as depicted by your paycheck and stable job history, you will find it tough to make huge purchases if your credit is tainted by a history of defaulting, late payments, huge debts, and repossessions or bankruptcy. Lenders will shy away from extending you credit for the fear of incurring costs or inconveniences when repossessing or collecting their payments.

Bad credit, however, should not stand in your way of making big purchases. Here are some tips on how you can manage to make these purchases:

Check your credit score

You need to be aware of what your score is and bear in mind there are three major credit bureaus—Equifax, TransUnion and Experian—so you need to get a credit report from each of them. With the knowledge of what your score is, you can find the next course of action.

Look for errors in your credit report

There could be errors in your credit report, which is ideally your history of dealing with borrowed money. Since the credit report is used to calculate your credit score, errors in the report could hurt your score. It is possible to get a free copy of your credit report every year from the major credit bureaus. Comb through your report to be sure that the information is up to date and free of errors. If you find any incorrect information or omissions, dispute them with the bureaus for rectification to improve your score.

Accept paying higher interest rates

Lenders will sometimes be willing to lend at high interest rates after evaluating a borrower’s credit history and realizing that the borrower is showing responsibility, say by paying on time and other good signs. With a low credit score, but one on a recovery path, you can get a loan, but at high interest rates, so be willing to pay at the higher rates.

Improve your credit

You may have such a bad credit score that you cannot qualify for a loan even at high interest rates to make your big purchase. The most viable option is to work on improving your score before seeking credit again. You can rebuild your credit by ensuring that you pay your bills and loan repayments on time. You can also engage the best tradelines company to add you as an authorized user on their accounts so that you benefit from their impressive credit history and improve your score after a short period. If your score improves, you can get a loan and make your big purchase.

Make a large down payment

Despite having a poor score, lenders could give you a chance if you make a huge down payment and dissuade them from disapproving to your loan. The reasoning here is that you are less likely to default after having paid a huge down payment. This is especially the case when buying a house on mortgage. For example, if you can raise a down payment of about 20% or more of your home’s value, then you stand higher chances of your mortgage being approved even without a very impressive credit score.


You can still make a big purchase even with a poor credit score by employing the above tips. You could also ask a friend or relative with good credit to co-sign for a loan in which case they will be the one to be held responsible if you default. You can also get a credit card from companies that specialize in rebuilding credit and use the card to make the big purchase.

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