Getting financed for a bad credit loan is a little more difficult than it was 5 years ago. Lenders, banks, and private for profit lenders are much more conservative when it comes to approving personal loans to Americans – especially when the borrowers have any kind of bad credit dings on their credit history.

The lenders who have a direct data connection with the 3 main credit bureaus will use their software to find out exactly how your credit rating stacks up against their lending criteria. The banks can set their software to so that you are approved based on varying degrees of credit worthiness. Since the great recession of 2008 to present time (early 2010 at the time of this writing) most banks have adjusted their lending data and software applications to accept less and less applicants. This is bad news for borrowers who have bad credit ratings, or LOW FICO scores. There are a few options though.

If you really want to get approved for a loan in 2010 and you have a very bad credit rating, you will need a co-borrower, and not to be confused with a co-signer – these are two entirely different terms and mean two entirely different things. A co-signer is just backing you up as someone will be responsible to pay back the loan if you default on the payments. It’s a simple trust matter. A co-borrower is actually on the application and their bank account numbers are attached to the loan – meaning that if you don’t make a payment, the funds will be paid from the co-borrower’s account(s). Basically, you and the co-borrower have taken out the loan together.

If you really want to get approved for a bad credit loan you have to give the lender an air-tight, solid form of security. Nothing less will do in these days of skittish bankers and lending institutions. I’m not seeing this change in 2010 and on to 2015. The banks have learned some hard lessons at the community level because of their direct attachment to the huge failing banks in the United States.

If you want to get approved for a bad credit loan in the near future, you will have to find a local community bank and make sure you have 100% security for the loan. This can be very difficult if you have a seriously damaged credit rating, or you are unemployed. Without a job you are not likely to get approved at all, or even “looked at” by a loan officer. They can’t approve any kind of loan unless you can prove a stable employment history. If you have been employed steady with the same employer for over 5 years, and you have lived in the same address for over 5 years, you have a better chance of getting approved. It used to be the magic number for lenders was two years employment with the same employer, and two years living at the same address – that has all changed now – and I would have to say this is a change for the better.

The fact is that the lender is NOT helping you out when they approve a loan you can’t really pay back. They are doing nobody a service (you or them) when they approve high risk persona loans. They need to tighten their belts now to try and get back on track. The lenders if today and into the next decade are going to be much more conservative. Even if they try and charge crazy high interest rates (APR), they are still going to lose if they approve extreme high risk financing. If the borrower (perhaps you) default on their payments soon after getting the loan, and skip town, the bank is still out even if they charge extremely high APR. The banks used to think that they would recoup all loses if they just over-charged all of the other borrowers on the books at high APR. That presumption is no longer valid. Most conventional lenders can’t take that chance any more, no matter how high the interest rates are on the note.

Where this all goes in 2010 and beyond is any-body’s guess, but my guess is that getting credit when you have bad credit is going to get tougher and tougher and tougher. If you have been bankrupt due to a divorce, a bad business decision, or simple over-extension of your personal finances, you will have to find a good friend or family member to act as a co-borrower. This is likely going to be the case for some time.

The entire lending apparatus is currently being changed so that is more difficult to get an reasonable installment loan over time, and with a high FICO score on your record. I believe we are going to see a complete overhaul of the personal lending apparatus in the next 20 years. The credit bureaus are going to be revamping their software applications and they will be talking to the lender’s computers in a different way. Borrowing money is going to be completely different in the future. It will likely be more akin to the Canadian banking system, whereby the borrower has to a very solid low-risk borrower before any monies are dispursed. The United States will no longer be able to play high risk casino style games in their borrowing practices.

Even if there is no regulation from the State and Federal level, the big and small banks are going to have to incorporate their own in-house regulations (lending value points) to protect themselves and their shareholders from future financial ruin.

A more blunt way to put it is that the banks have to smarten up and the borrowers have to smarten up – and quickly, or we will see more financial bubbles growing and bursting at a more rapid pace.