How to get a loan with bad credit in 2022

Banks, microfinance organizations (MFIs) and credit cooperatives are not required to explain to customers why a loan was denied. But you can often hear from managers: “You have a bad credit history.” And then a person who needs money falls into a stupor.

Maybe he never took loans from this institution, but everyone knows about him. Or he received loans, paid at the wrong time, and it came to this. The financial mistakes of the past are not a sentence. We will tell you together with experts how to get a loan with bad credit history in 2022 in our step-by-step guide for readers.

What is a credit history

A credit history (CI) is a set of data that contains information about all previously issued loans and current loans of a person. The data is stored in the bureau of credit histories – BKI. Information in them must be transmitted by all banks, MFIs and credit cooperatives.

Credit History Act¹ It has been in operation since 2004, but it is constantly supplemented and refined. They make it more convenient for people and banks. Which is not surprising, since more and more loans are being taken. It is important for financial institutions to objectively evaluate the portrait of the borrower in order to understand whether to lend or refuse. And people have a kind of personal document in which you can evaluate your debts.

Records in the BCI are kept for seven years – for each credit transaction and from the moment of its last change. Let’s imagine that you last took out a loan in 2014, paid off your debt for a couple of months, and in 2022 you came back to take a loan. The lender will check your credit history but see nothing. This means that he will not be able to rely on credit history and will have to make a decision based on other factors.

Another example: a person took a loan in 2020 and allowed delays in payments. Then in 2021 I received another loan. In 2022, he turned to the bank for a new one. He sent a request to the BKI and saw the following picture: there were delays, there is still an outstanding loan. A financial institution can draw a conclusion for itself: it is risky to give money to such a borrower.

Bad credit is a relative term. There are no uniform standards and rules for which borrower to blacklist based on data from the BCI, and which one to work with. One bank will see that its potential client had delays in payments, has outstanding debts, but still does not consider it critical for itself and approves the loan. Another financial institution may not like the fact that a person once made a delay once, even if he then repaid everything.

Conditions for obtaining a loan with bad credit history

How to get a loan with bad credit history step by step

1. Find out your credit history

You can request a free credit history in each of the BCIs twice a year online and once a year – an extract on paper. All other requests will be paid – approximately 600 rubles for the service.

There are eight large BCIs in Our Country (here is a list of them on the website of the Central Bank) and a few more small ones. To find out exactly where your history is stored, go to the State Services website. In the search bar, type: “Information about credit bureaus”, then “For individuals”. 

Within a day – usually in a couple of hours – an answer will come from the Central Bank. It lists the bureaus that store your credit history, their contacts and a link to the site. It looks like this:

Go to the sites, register and then you can request a report. This is a large document – the longer and richer the credit history, the more meaningful it is. Exactly the same statement about a potential borrower is received by financial institutions when a loan application is received.

This is how the report on the credit history of the United Credit Bureau looks like:

The design may differ, but the essence is the same for everyone.

The credit history shows how the client made payments over the past seven years, whether there were delays, in which month and for how long.

2. Look at your credit score

To make it even easier for banks to make decisions, each person who is recorded in the credit bureaus is given a score. It’s called an Individual Credit Rating (ICR). Measured from 1 to 999 points. Now the scale is unified, although earlier BCIs could use their own assessment system. The more points, the more attractive the borrower for banks.

Credit rating in 2022 can be checked for free an unlimited number of times. This is what a credit rating statement from the United Credit Bureau looks like.

The rating is now accompanied by mandatory graphical clarity. That is, they make a graph or, as in the examples, a kind of speedometer with an estimate. Red zone – means a low credit score and a bad credit history. Yellow – average indicators. Green and a small light green zone mean that everything is fine and excellent.

If your rating is in the red zone, it means that your credit history is bad and it will not be easy to get a loan.

IMPORTANT

There are mistakes in the credit rating and in the credit history. Incorrect information about loans and delinquencies, requests to banks that you did not make. Sometimes inaccuracy can overshadow the portrait of the borrower. You can remove incorrect information. To do this, in 2022 it is worth contacting either the bank that made the inaccuracy, or the credit bureau directly. Within ten days they must respond. It happens that the BKI does not agree that a mistake has been made. Then the person has the right to go to court.

3. Apply for a loan

Lawyer and expert consultant of the company “Financial and Legal Alliance” Alexey Sorokin talks about each of the loan options and evaluates its success for people with bad credit history.

Banks

Chance of getting a loan: low

A large financial institution will not take risks and issue money to an unscrupulous borrower. Especially those who have open delays at the time of applying.

Tip: if you still decide to start with banks, then do not send applications to all at once. Applications are reflected in the BCI. Banks will see that massive requests have been received there – this is not a good sign for them. Choose 1-2 most loyal banks. Perhaps those where you have previously taken a loan or you have an account opened. Wait for a response from them. If refusal, apply to other banks.

Got approved? Don’t count on favorable terms. The interest rate will be high, and the repayment period will be minimal.

Credit consumer cooperatives (CPC)

Chance of getting a loan: average

Cooperatives are organized as follows: shareholders contribute their funds to a common fund. From it, other shareholders can take loans for their needs. Previously (in the USSR and Tsarist Our Country), only members of a community, one collective, became shareholders. Now the same scheme is used for other purposes. For example, accepting investments from the population and issuing loans.

It works like this: the borrower comes to the PDA and says that he wants to get a loan. He is offered to become a shareholder. Often, for free. Now that he is a member of the cooperative, he can use his money. But on terms like in a bank – that is, to pay the debt with interest.

Be vigilant when contacting the CCP. An unscrupulous organization may operate under this sign. Check the name in the register of the Central Bank² If yes, then everything is legal. In cooperatives, the percentage is higher than in banks, but they are more loyal to people with a bad credit history.

Microfinance organizations (MFIs)

Chance of getting a loan: above average

In everyday life, these organizations are called “quick money”. They are loyal to most borrowers, but the downside is that the money is issued at huge interest rates (up to 365% per annum, it’s no longer possible, as the Central Bank decided³). The good news for people with bad credit is that MFIs are denied only for good reasons. For example, if the borrower refuses to show a passport. Bad credit history is not so critical for them.

Pawnshop

Chance of getting a loan: high

Pawnshops often do not require a credit history, as they take some personal item as collateral. Most often, jewelry, appliances, cars.

4. Look for alternatives

When a loan is denied due to bad credit, be aware of other ways to get money.

Credit card. The bank may not agree to a loan, but approve a credit card. You will be disciplined in paying off debt on it and improve your credit history.

Overdraft. This service is connected to debit cards, that is, ordinary bank cards. Not all banks have an overdraft facility. Its essence: the ability to go beyond the limit of funds on the account. That is, the balance will become negative. For example, 100 rubles were on the card, you made a purchase for 3000 rubles and now the balance is -2900 rubles. Overdrafts, like credit cards, have high interest rates. It must be repaid within a short period of time, usually within a month.

Refinancing of old loans. Sometimes a bad credit history becomes bad not because of the number of delinquencies, but because a person has too much debt. The financial institution may simply be afraid that the client will not pull another loan. Then it makes sense to take money to refinance loans, close debts in other banks ahead of schedule and stay with one loan.

5. Agree to all the conditions of banks

Compensate for a bad credit history can:

• co-borrowers and guarantors.  The main thing is that they have everything in order with a credit history and people agree to close the loan in case of your insolvency;
• reputation improvement and credit history improvement programs. There are not everywhere. The bottom line is that the client takes a loan from the bank on rather unfavorable terms. With a serious overpayment, for a short time. But a small amount. When this debt is closed, the bank promises to be more loyal to you and approve a larger loan;
• bail. Banks have the right to accept real estate – apartments, apartments, country houses – as collateral. If the borrower cannot pay, the object will be sold;
• Additional services. The bank can set the terms of the loan: you start a salary card with it, open a deposit, connect additional services. The most common is insurance: life, health, from dismissal. You will have to overpay for this, perhaps from the money that was given on credit.

6. Bankruptcy procedure

If they do not give loans at all and there is no way to deal with the old one, you can go through the bankruptcy procedure. True, for the next five years, when applying for loans, you will have to inform banks and other financial institutions that you are bankrupt. With such a fact in the biography, it is difficult to get a loan. But other debts will be written off, and during this time the credit history will almost completely disappear from the BCI – this can be considered the beginning of life from scratch.

Expert advice on getting a loan with bad credit

Expert consultant of the “Financial and Legal Alliance” Alexey Sorokin lists what to avoid, if possible, in a situation where you need to get a loan with a bad credit history.

• Take an additional loan to cover the delay in another way. The new conditions of the bank or MFI may be even less favorable. In addition, the debt burden remains.
• Go to MFI. The rate is 365% per annum, substantial fines even for a small delay, commissions for all services. This is a debt trap that is not easy to get out of.
• Take loans online. In fact, these are the same MFIs. But the risk of leaking your personal data is much higher. In addition, there are fraudulent sites: they receive your scans of documents, signature samples, and with them they already take a loan on your behalf.
• Contact intermediaries. They offer to take a larger loan to close the previous ones. They charge a percentage for their services. They do not shy away from forging documents that allegedly confirm the debtor’s income according to a bank certificate and 2-personal income tax. No one can “negotiate” with the bank, except you: bad credit history intermediaries will not help. Skip past ads that promise to remove CI.

Anton Rogachevsky, an employee of the analytical center of the Synergy University, an expert in the field of banking, also shared his advice.

– Banks may look at you as a borrower somewhat more loyally if you are an old client and you have not had any serious violations before.

Speaking about the hopeless situation, we should mention the categories of loan quality⁴. This indicator tells the bank the degree of credit risk on the loan. If the loan is in the V category of quality and recognized as bad, that is, you did not return it at all and cannot do it, most likely in the foreseeable future, you are unlikely to receive a loan anywhere. With category IV, you can improve your rating by showing payment discipline and increasing your income level.

A person with bad credit often has to deal with rejections. There are several ways for you:

• purposefully send applications to banks in the hope that some will be more loyal in this matter;
• apply to MFIs that release some negative points on the brakes;
• contact private investors.

Credit history can be corrected, but the process is not fast. On average, it will take at least 6-12 months to improve your credit history. During this period, you need to focus on payment discipline for your other debts. You can take small loans or installments to buy household appliances, phones, and so on. At the same time, it is worthwhile to withstand the entire term of payments, and not to extinguish ahead of schedule. Even if it comes out a little more expensive, it will significantly improve your credit rating as a borrower.

Popular questions and answers

Answers Anton Rogachevsky, an employee of the Analytical Center of the University “Synergy”, an expert in the field of banking.

Sources of

1. http://www.consultant.ru/document/cons_doc_LAW_51043/
2. https://www.cbr.ru/search/?text=государственный+реестр+кредитных+потребительских+кооперативов
3. https://www.cbr.ru/microfinance/
4. https://base.garant.ru/584458/1cafb24d049dcd1e7707a22d98e9858f/
5. https://www.garant.ru/products/ipo/editions/vesti/399583/12/