1. Get your credit reports and scores

First, you need to find out: Do you really have bad credit? Maybe the negative stuff on your record is erroneous, or too old to matter.

See what the major credit reporting agencies — Equifax, TransUnion and Experian — have on you. Obtain free credit reports from the big three by going to AnnualCreditReport.com. Every year, you're entitled to one free copy from each. 

The reports won't include credit scores. You may need to pay a fee for those; myFICO is one place where you can obtain them.

2. Understand your reports and scores

Review your credit reports and look for the sorts of things that concern lenders, such as any late payments you made within the past two years, and whether you're using too much of your available credit.

Credit scores range from 300 to 850, and a score below 700 is considered fair or poor. If yours is under 600, you can expect a very high interest rate — if you can get a personal loan at all.

3. Visit the nearest credit union

If you have a weak score, your options may be limited. Credit unions in your area may be an excellent source for nontraditional credit loans, because those institutions tend to have more flexible lending programs.

If you're turned down, you can ask why you were rejected and what changes you need to make in your credit profile so you can try again, and maybe get approved next time!

4. Look into bad-credit personal loans

If a credit union does not have a program for you, then check out online personal loan options for bad credit. These are offered by lenders including LendingPoint, Lending Club, OneMain and Mariner Finance.

The interest rates for these loans will be high, so brace yourself for higher payments. The loans also tend to come with high fees.

And while most personal loans require no collateral, some of these lenders do offer secured loan products, where you'll need to put up collateral, such as real estate or your car.

Some of these programs call for co-signers. But if you are going to need a co-signer, you might as well consider a more conventional loan product, such as a credit card with you as an authorized user.

About the Author

Doug Whiteman

Doug Whiteman

Editor-in-Chief

Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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