Can’t get a loan because you have a bad credit score?
If you are one of those who are hesitant to apply for a loan because of a bad credit score, then there is good news for you! You can apply for payday installment loans because you can be approved despite a bad credit score. However, you may be given less favorable terms compared to others who have good scores.
Usually, a credit score is determined using the FICO (Fair, Isaacs & Co.) score system. The FICO score is used by big credit reporting agencies (Equifax, Experian and TransUnion) to determine the credit score of a borrower. The range of scores is from 300 (lowest score, and considered to be a bad credit score) to 850 (the perfect one).
Determining your credit score depends on the type of credit you have and your lender. For home mortgages, a score of 640 is best, but 620 may be acceptable. Car loans and credit cards consider a FICO score under 620 as bad. For lenders of payday installment loans, you may be approved for a loan after the lender looks carefully at the borrower’s credit history and assesses the risk of lending money. This will be reflected in the interest rate of the loan because the lower the credit score, the higher the interest rates are.
Why do people get bad credit scores? The most obvious reason why people get bad credit scores is paying for bills late. If you continuously delay your payments on your payday installment loans, credit cards, and mortgages, your credit score will lower.
Another instance of a bad credit score is when you owe more than 80% of your available credit on your credit card. In order to avoid lowering your credit score, keep your debts below than 25% of your available credit.
Applying for more than one payday installment loan or other loans at the same time can also affect your score. If you have multiple debts, it will surely lower your credit score, hence producing a negative effect. Also a short credit history can affect your credit score. For this reason, it is better to keep old credit accounts open and avoid applying for new ones.
You can also get bad credit scores through unpaid bills. This includes not paying for tax liens, judgments and application for bankruptcies. This will appear on your credit report and will lower your credit score.
How to avoid getting bad credit scores:
To prevent getting a bad credit score, you must invest in building a credit profile that meets the criteria used to calculate the FICO score. There are 5 categories that affect your credit score according to FICO:
1) payment history (35%)
2) amount of debt (30%)
3) length of credit history (15%)
4) new credit lines (10%)
5) types of credit used (10%)
Working on these categories can help improve your credit score.
The truth is bad credit score can be prevented. It can’t be done immediately or overnight, but it can be worked out with patience and hard work.