Loan Advice

Emergency Cash for Bad Credit

by Jim Hughes   June 26, 2018

Getting a personal loan with less than 600 credit score can be difficult, but it is not impossible. Learn how to obtain emergency cash with bad credit.

Nearly one-third of American consumers have bad credit scores. Having a score that is less than 600 will make it difficult to find funding. This article examines how to obtain emergency cash for bad credit. Look out for tips on how you can turn your bad credit situation around.

Causes of Bad Credit Scores

Perhaps no other number assigned to you matters more than your credit score. The three-digit number determines what kind of access you will have to loans and how expensive they will be. You have a certain amount of control over the number, as poor financial choices will lead to a bad credit score. Knowing how to avoid the mistakes is the first step toward a higher score.

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Pay on Time

An entire 35 percent of your credit score is calculated by the timeliness of your credit account payments. Late credit account payments can do an enormous amount of damage to your score. If necessary, reach out to your creditor to arrange an alternative payment date to avoid a blemish on your credit report.

Never Default on a Credit Account

Late payments drag your score through the mud, but it is a whole lot worse to default on money owed. To make matters worse, creditors charge off defaulted accounts after just a few months, which pushes your credit score down even lower.

When Debt Collectors Call

Having a credit account go to collections is worse than it sounds. Afterward, your credit report will include a section that lists the number of your credit accounts in collections.

Bankruptcy and Foreclosure

Filing for bankruptcy should never be your first, second, or third choice. It can take up to 10 years to wipe away the damage caused by a Chapter 7 or Chapter 13 bankruptcy. Look at foreclosure as the nuclear version of a credit account default. It sends the message to creditors that you are as risky as it gets.

How to Get Emergency Cash with Bad Credit

Those with low credit scores have to think beyond traditional loans since traditional lenders do not approve such requests. With bad credit, you may get approved for high-interest payday loans. However, be sure to try alternative non-loan options first.

One Time Garage Sale

Host a garage sale. By selling everything from your clothes to your electronics, you can raise hundreds of dollars by selling your stuff over the course of a weekend. Think about all the clutter you eliminate as well.

Odd Jobs Equal Quick Cash

Remember the good old days, when you made money as a child and teenager cutting grass and shoveling snow? When you hit a financial wall, performing odd jobs was the ideal way to generate emergency cash. You can also parlay the professional skills you implement at work by running a side business. For example, if you repair desktops at your full-time job, why not offer your professionals skills to friends, neighbors, and family members? Just make sure you didn’t sign anything at work that would prohibit you from taking part in such activities (ideally, you will find out this information without cluing your boss into your plans).

Cash in Financial Investments

If you invested in bonds, stocks, or certificate of deposits (CDs), you have a source for emergency cash that does not require the vetting of your credit score. You can redeem financial investments within a few days, but the downside is you might have to pay taxes or early withdrawal fees. Do not tap into a retirement plan to gain access to emergency funds. Not only do you pay costly early withdrawal fees, but you also lose the benefit of compounding interest.

Borrow from Your Life Insurance Policy

A whole life insurance policy that has accumulated cash value over several years can be a good source for short-term funding. By borrowing against your life insurance, you do not have to worry about fees or taxes reducing your take. Keep in mind that you might be accountable for taxes on capital gains, and you lose the cash value of the policy.

Checking Account Overdraft Loan

Overdraft protection on your checking account prevents costly overdraft charges from appearing on monthly account statements. The financial protection also offers you a convenient way to raise money without having to reveal your credit score. You most likely have to write a check or use a debit card to make a specific purchase. Most banks do not allow customers to write overdraft protected checks for “cash.”  There are two downsides to checking account overdraft loans. First, you should expect a high-interest rate on the loans. Then, there is a chance that you will lose your checking account if you do not pay back the loan fast enough.

Are Payday Loans Viable Emergency Cash Options?

Bad credit means the chances of receiving approval for a loan from a traditional lender are nil and none. Does this mean a payday loan is a viable option? Some short-term loan lenders use your paycheck as collateral. This means there is less risk for the lender and a better chance that you will get the loan.

Lean on Friends and Family Members

You have one source for emergency cash that does not require your credit score. Tap into your network of friends and relatives to find someone who is willing to give you a short-term loan to help navigate you through turbulent financial times. Any loan you receive from a friend or family member should spell out the terms, such as loan length and the accrued interest charged.

Charitable Assistance

They say charity starts at home, but when you need emergency cash for bad credit, charitable organizations represent the best opportunity to raise cash to pay medical bills or make a monthly mortgage payment. Organizations like Catholic Charities and the Salvation Army offer assistance regardless of your religious affiliation. However, it is difficult to obtain emergency cash from charitable organizations to meet expenses due tomorrow. Charitable organizations typically require considerable documentation that can sometimes take weeks to process.

How to Fix Bad Credit

Despite what you might hear, how to fix bad credit does not involve a miracle cure or the work of a credit deity. Improving bad credit is a lot like losing weight: both require considerable time and plenty of hard work. You cannot wave a wand over your credit score and expect it to climb hundreds of points.

The key to elevating your credit score is to fix the issues you have in your credit report. Your credit report contains different sections that evaluate specific credit factors. You might have a stellar payment history, but one default has put a huge blemish on your credit history. How to fix bad credit starts by learning more about your credit history.

Order a Free Copy of Your Credit Report

It is hard to fix something when you do not know what needs fixing. The United States Congress passed a law allowing consumers to receive a free copy of their credit reports every 365 days. Your credit report presents the data used to calculate your credit score. Review the data to confirm the accuracy of the information presented in the credit report. Federal law grants the consumers the right to contest credit report errors.

Reduce Your Debt Burden

Consumers who rack up high debt percentages can expect credit scores to fall like a rock from a cliff. Lenders frown on consumers that have little or no debt wriggle room. The first order of business involves paying down the credit card carrying the highest interest rate. Put aside as much money as you can afford to reduce your debt load. After implementing your debt reduction plan, stop using credit to make purchases. Avoid the enticements of cash back and loyal customer reward programs by using the more sensible cash only purchasing policy. After you see a significant reduction in your debt load, you should see a corresponding increase in your credit score.

Create a Monthly Budget

You do not need to buy advanced personal finance software to create a monthly budget. A simple spreadsheet or even a legal pad does the job. The important point is you need to know when money comes in and how you are spending what you earn. Creating a monthly budget requires you to make some tough spending choices, which means you should prioritize expenses. At the top of the budget should be payments for food and housing, followed by vehicle and debt reduction expenses. Focus on reducing what you spend on travel and entertainment expenses, and reallocate the money towards the monthly expenses that matter.

Tie an Electronic String Around Your Finger

Of all the whistles and bells that come with contemporary personal finance software, simple payment reminders might be the most effective tool you have to improve your credit score. After all, just one missed payment can turn a stellar credit report into one that turns off potential creditors. As a more effective personal finance strategy, you can set up automatic monthly deductions from your checking account to take care of accounts such as an auto loan and credit card balances.

Apply for a Secured Credit Card

Chances are a bad credit score has limited your credit card options, at least your unsecured credit card options. If you want to reestablish your good credit name, consider applying for a secured credit card. You set up a secured account by sending the creditor a cash deposit as collateral. The cash collateral also represents the maximum amount of credit you have in your account. Your goal is to use the secured credit card to make a couple of small purchases each month, which you pay off in full to rebuild your credit history. Many secured credit cards reward consumers that pay on time by eventually extending offers of unsecured credit.

Just be sure to make sure the card you choose reports your payments to the credit bureaus. Many people think they are repairing their credit by paying for a debit card, but the card isn’t doing their credit any good.

Stay Apprised of Bad Times Coming

Finally, if you expect to hit a rocky patch in your finances, make sure to communicate with every creditor to create alternative payment schedules that ensure your credit score remains in relatively good shape. Simply ignoring creditor requests for payment is a sure way to land in the bad credit score column.

Jim Hughes   OpenCashAdvance Marketing Manager
Personal Finance
Jim Hughes remembers checking his first email on the original BlackBerry 850 nearly 20 years ago. It was spam, and he fell for it. Even so, he’s been on the beat every day since, following the ebbs and flows of financial technology. Look to Jim for insider exclusives on shorter-duration loans, installment loans, and other popular products in fintech today.