Peer-to-peer lending companies, including Prosper and Lending Club, have raised the minimum credit score that it takes to get a loan during the last year and a half making it more difficult for those with bad credit to participate in the world of peer-to-peer lending.
Typically borrowers have to have a credit score of 660 or better before they will get approved for any sort of peer-to-peer loan. These aren’t any firms that specialize in peer-to-peer loans for bad credit borrowers simply because of the risk involved. Depending on who you believe, between 10% and 30% of all peer-to-peer loans that are generated will go into default over the course of the loan. Since these types of loans are generally risky anyway, lending to borrowers with bad credit involves the lenders and the companies taking on too much risk for it to be worth it to them at any interest rate.
If you have bad credit and want to borrow money through a peer-to-peer loan, your best bet is to get your credit report in shape before going forward and applying for a peer-to-peer loan. The first thing you want to do is make sure that you don’t have any active delinquencies on your credit report. Meaning, if you have any loans that you haven’t paid on in a while, you’ll need to settle them or catch up on them before anyone will qualify you for a peer-to-peer loan or any sort of loan.
Once you get your current delinquencies taken care of, go to a site like Credit Karma, Quizzle or Credit Karma to see how your credit score is doing. Often these sites will provide you with suggestions about how to improve your credit score. These will also give you a good idea of what your current credit score is and let you know if you’re doing well enough to qualify for a peer-to-peer loan.
Once you get your credit sufficiently in good shape, you can then go and apply for a peer to peer loan, even if you have a history of bad credit. When making your loan listing, verifying your income will be a very good way to re-assure borrowers that you can repay the peer-to-peer loan that you take out.
Generally peer-to-peer lending for bad credit borrowers isn’t available until the borrower cleans up their credit score and can verify their income. If you are in a situation where you have bad credit and need to get a loan, you’ll probably have to borrower from a friend or family member or get your credit report in shape so that you can qualify for a peer-to-peer loan or any sort of bank loan.
