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9 months ago

What Factors Do Bad Credit Lenders Consider Most Important?

by Vinicius Rocha


Navigating the realm of personal finance can be challenging, especially when your credit score is less than stellar. In fact, this can often act as a significant barrier, restricting your access to loans and other financial benefits.

However, for those with subpar credit ratings, there's a glimmer of hope: lenders who cater specifically to individuals with bad credit.

These specialized lenders understand that various financial hardships can lead to a damaged credit score. When they evaluate loan applications, they consider multiple factors.

Credit Score

Despite being more forgiving than traditional banks regarding credit scores, bad credit lenders still place a significant emphasis on this number during their evaluation process.

Your credit score quantifies your credit reliability, giving lenders an immediate glimpse into your financial past. While these lenders may accept lower scores than their conventional counterparts, they still maintain minimum standards. In general, most bad credit loan providers view a credit score above 550 as adequate.

Income and Job Stability

Your income stability and employment status are among the key elements that bad credit lenders scrutinize. They need to ascertain that you have a steady income stream to service the loan, and stable employment – through full-time or part-time jobs, self-employment, or other income sources – can greatly enhance your chances of getting approved.

Lenders may require evidence of income, like pay slips or bank statements, to gauge your capacity to meet loan repayment obligations timely.

Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is another vital component in the assessment process.

This ratio is derived by dividing your monthly debt payments by your monthly earnings. Lenders catering to people with bad credit aim to ensure that your income is sufficient enough to handle your existing financial commitments and the proposed loan repayments.

A lower DTI ratio suggests that you have more disposable income available for loan repayments, making you a more attractive candidate.


Some bad credit lenders offer secured loans, where you pledge an asset, such as a car or valuable personal property, as collateral.

Collateral serves as a safety net for the lender, reducing their risk if you fail to repay the loan. Having collateral can significantly improve your chances of loan approval, even with a bad credit history. However, it's important to remember that if you default on the loan, you risk losing the collateral.

Loan Purpose

Lenders specializing in bad credit may also take into account the loan's intended use during the evaluation of your application. Some lenders impose restrictions on the allocation of funds, while others offer more flexibility. It's crucial to disclose your planned use of the loan clearly, as this can influence the lender's final decision.

Typical reasons for loans encompass debt consolidation, medical costs, home renovations, and unexpected emergencies.

Financial Track Record

Beyond your credit score, lenders catering to bad credit may scrutinize your comprehensive financial history. This involves looking at your credit report for any past instances of late payments, defaults, bankruptcies, and other unfavourable records.

While a track record of financial struggles could make it tougher to obtain a loan, certain lenders are more lenient than others and might view recent positive financial actions as indicators of progress.

References and Recommendations

In some cases, bad credit lenders may ask for references or recommendations from individuals who can vouch for your character and ability to repay the loan. These references could be friends, family members, or professional contacts.

Providing strong references can help establish trust with the lender and demonstrate your commitment to meeting your financial obligations.

Loan Terms and Interest Rates

Lenders catering to individuals with poor credit typically offer loans carrying higher interest rates and shorter repayment timelines compared to conventional lenders. These conditions are put in place to counterbalance the risk associated with lending to individuals with a history of bad credit.

As a potential borrower, it's paramount that you meticulously examine the loan conditions and comprehend the overall borrowing cost. While a loan with unfavourable terms might seem appealing, it's critical to ensure that the repayment structure is within your financial capacity.

What Distinguishes a Bad Credit Lender from Traditional Lenders?

A bad credit lender primarily offers loans to people with less-than-stellar credit scores.

Contrary to traditional lenders like banks and credit unions, bad credit lenders adopt a more flexible approach toward credit score requirements. They acknowledge that financial mishaps can occur to anyone, and consider other aspects such as income stability and employment status when assessing loan applications.

How Do I Improve My Chances of Getting Approved for a Bad Credit Loan?

To enhance your likelihood of approval, focus on demonstrating your ability to repay the loan. Ensure you have a steady source of income, a manageable debt-to-income ratio, and a clear plan for using the loan funds.

Be transparent about your financial history and provide accurate information on your application. Additionally, consider offering collateral if it's an option, as this can boost your chances of approval.

All in all, several elements are taken into account by bad credit lenders when determining an applicant's loan eligibility. While a low credit score may be the chief reason for seeking out such lenders, it's not the sole factor they evaluate - various facets of your financial status, including income, job stability, debt-to-income ratio, collateral, loan purpose, financial track record, and references may also be important.

Should you find yourself requiring a bad credit loan, it's vital to come prepared and present a compelling case to the lender. Make sure you have a consistent income source, a manageable debt burden, and a well-defined plan for the loan's utilization. By comprehending the aspects that bad credit lenders deem crucial, you can enhance your prospects of obtaining the financial aid you need.

For individuals with bad credit in Canada, Magical Credit is a reputable and trusted bad credit lender that considers these factors when evaluating loan applications. If you're ready to explore your options and take control of your financial future, consider reaching out to Magical Credit today to discuss your borrowing needs.

Ready to take the first step towards financial freedom? Contact our team at Magical Credit today and explore your bad credit loan options. We’re here to help you secure the financial assistance you need, even if you have a less-than-perfect credit history.

Don't let bad credit hold you back – reach out to Magical Credit and take control of your financial future now!


Magical Installment Loans: We offer installment loans in the amount of $1,500- $20,000 that have a 12-60 month term with an APR 19.99% min - 46.8% max. On $1,500 borrowed for a 1 year term at 3.9% per month, the total cost of borrowing including a $194 fee is $896.00. The total amount to be paid back with interest and fee is $2,396.00. AB License #349796 and BC License #83626

NOTE: Our installment loans are open, so you can pay off your loan at any time with no penalty. You will only pay interest up to the date you pay it off.

Magical Cash Loans - Ontario, British Columbia, Northwest Territories, Nunavut, and Yukon Residents only: We offer Magical Cash Loans in the amount of $100-$1,500.00. The cost of borrowing is $15.00 per $100.00 for each $100.00 borrowed. On a $1,000.00 loan for 14 days, the cost of borrowing is $150.00. The total to payback is $1,150.00 which is an annual percentage rate of 391.07%. ON License #4741412. BC License#85919.

The Loan must be paid in full by the end of term, no extensions or exceptions, no automatic renewals. Failure to pay your debt on time will impact your future credit with Magical Credit Inc. and other credit lenders. All delinquencies will be reported to the Credit Bureaus.

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