To obtain a loan with problematic credit reports, individuals should first review and dispute inaccuracies on their credit reports with the three major bureaus (Equifax, Experian, and TransUnion). Next, they may explore secured loans, which require collateral, or consider alternative lenders like credit unions, peer-to-peer platforms, or online financial institutions that offer more flexible approval criteria. Building a credit history through small, timely payments on secured credit cards or becoming an authorized user on someone else’s account can gradually improve creditworthiness. Additionally, seeking a cosigner with strong credit may help qualify for better terms.

The effectiveness of these strategies stems from the fact that traditional lenders often reject applicants with credit scores below 600 due to higher default risks. However, alternative options mitigate this risk by leveraging collateral, alternative credit data, or personal guarantees. For example, secured loans accounted for 15% of all consumer loans in 2022, with approval rates averaging 70% compared to 30% for unsecured loans, according to the Federal Reserve. Data from the Consumer Financial Protection Bureau (CFPB) reveals that 20% of U.S. consumers have at least one error on their credit reports, which can lower scores by up to 100 points if unresolved. Disputing inaccuracies can increase approval chances by correcting negative marks like missed payments or collections. Over time, consistent financial behavior can raise scores by 50–100 points in 6–12 months, per FICO research. While higher interest rates or smaller loan amounts may apply initially, these steps enable access to credit and eventual transition to prime lending terms.