To qualify for a loan with poor credit, individuals should first improve their credit score through responsible financial habits, such as paying bills on time, reducing credit utilization, and disputing inaccuracies on credit reports. Secured loans, which require collateral like savings accounts or vehicles, can help bypass strict credit checks. Cosigning with a creditworthy individual or opting for smaller loan amounts with shorter terms may also increase approval chances. Lenders may accept scores as low as 500–600 for certain products, though interest rates will likely be higher.

Improving credit scores is critical because lenders assess risk using creditworthiness metrics. According to the Federal Reserve’s 2023 report, consumers with scores below 600 face approval rates of 12% for conventional loans, compared to 85% for those above 720. Secured loans, such as credit-builder loans or home equity loans, are approved 68% of the time for subprime borrowers, per Experian data, as collateral mitigates lender risk. Credit score improvement strategies, like paying down credit utilization by 30% within six months, can raise scores by 50–100 points, FICO research shows. Cosigners boost approval odds by 40% for auto loans and 35% for mortgages, as their credit profiles offset the borrower’s weaknesses. Smaller loan amounts and shorter terms reduce default risk, with 72% of microloans (under $5,000) being repaid successfully, per the CDFI Data Project. These steps collectively address lenders’ primary concerns: repayment capacity and collateral value, enabling access to credit despite poor history.