Poor Credit

• The major determinant in credit extension is creditworthiness. The three major credit bureaus--Trans Union, Equifax and Experian--cull together reports from credit card companies, banks and finance companies to determine your credit score. In general, FICO scores range from 300 to 800. An excellent credit score is 750 or higher, and a poor score is 500 or below. To improve your credit, pay all bills on time, do not carry excessive balances, and keep only one to two credit card accounts.
  
  

Prime vs. Subprime

• Prime customers can often obtain the lowest market rates on all loans--mortgages, car loans and personal loans. The subprime lending market operates on the premise that higher risk means higher fees and rates. Before seeking refinancing, it's important to understand that the teaser rates and television ad rates will not apply to you. Expect higher rates and less favorable terms.
  
  

Lenders

• Finance companies--subdivisions of major banks, mainly--often offer subprime and prime products. Such lenders include CitiFinancial, HSBC and Wells Fargo. It is important to seek out the finance division, not the banking division. These companies do not offer or service checking and savings accounts; instead they operate as individual consumer lending units.
  
  

How to Research

• LendingTree.com is an online lender and information source. In essence, the site acts as an online broker. It does, however, offer sound financial advice--especially with regard to poor credit. Before applying to any broker or lender with poor credit, make sure to research all potential lenders online and among friends, family, and colleagues. In addition, research the company at the BBB (Better Business Bureau) for any red flags. See Resources for a link.
  
  

Warning

• It's vitally important to be aware of lending scams. Unethical lenders often take advantage of vulnerable and desperate borrowers. Whenever possible, deal with a subprime loan officer in person. Gut feelings go a long way in establishing trust. Also, refrain from applying over and over again--each credit inquiry will negatively affect your credit score. Last, do not sign any paperwork about which you are confused, and report any unethical practices to your state's attorney general.