If you’ve had the wind knocked out of your credit scores due to financial problems, or because you’re struggling to build credit for the first time, it can be challenging to get a loan. It’s critical to understand the factors that affect your credit and how to build it. You might be surprised to learn that you have more options than you think. I’ll give you five ways to find a loan, even with bad credit.

Having bad credit or no credit is a major stumbling block to getting a traditional loan.

Having bad credit or no credit is a major stumbling block to getting a traditional loan. Lenders view you as a high-risk customer who might not repay them. It’s just a fact that until you raise your credit scores, you won’t fit standard lending guidelines that traditional big banks have to follow.

Factors that affect your credit scores

A common credit misconception is that you only have one credit score. Although FICO is probably the most well-known type of score, there are hundreds of different credit scoring models used by mortgage lenders, credit card issuers, insurers, and merchants. There are even multiple types and versions of FICO scores.

Credit scoring models use algorithms to crunch the data in your credit reports, which are maintained by several nationwide credit bureaus, including Equifax, Experian, and TransUnion. Here are ranges for some popular credit scores:

  • FICO Auto Score: 250 to 900
  • FICO Mortgage Score: 300 to 850
  • TransUnion: 300 to 850
  • VantageScore: 501 to 990

In addition to assigning different score ranges, credit scoring models emphasize different factors. For instance, having a missed payment on an auto loan might be weighted more heavily when factored into an auto-scoring model.

The exact formulas of credit scoring models are proprietary. However, FICO says they use the following factors and weights as a baseline for their credit scores.

  • Payment history (35%). A record of late payments, accounts in collections, and bankruptcies. This is the top-ranking factor.

    Takeaway: Making payments on time is a critical factor for maintaining high credit scores.
     

  • Amounts owed (30%). Your debt compared to your available credit, which is known as credit utilization.

    Takeaway: Using a smaller percentage of available credit you have on credit cards and lines of credit boosts your credit scores.
     

  • Age of credit history (15%). How long you…

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