If you are one of those who is hesitant to apply for a loan because of a bad credit score, then there is good news for you! With a payday installment loan, you can still qualify despite of a bad credit score. However, you will be given less favorable terms compared to having good scores.
So how bad is a bad credit score, you may ask? A credit score is determined by using the FICO (Fair, Isaacs & Co.) score system. The FICO score is used by big credit reporting agencies (Equifax, Experian and TransUnion) in determining the credit score of a borrower. The range of scores is from 300 to 850 (the perfect one). Anything below 300 is considered a bad credit score.
The criteria used to determine a bad 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. Lenders of payday installment loans, may approve you for credit after looking carefully at your credit history and assessing the risk of lending you money. This will be reflected on the interest rates of the loan because the lower the score, the higher the interest rates are.
So, what makes credit bad? The most obvious reason why we get bad credit scores is paying our bills and loans late. If you continuously delay your payments on your payday installment loans, credit cards, and mortgages, your credit score will be lower than if you make timely payments.
Another reason for 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 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 numerous debts, this can lower your credit score, thereby producing a negative effect. On the other hand, a short credit history can affect your credit scores too. For this reason, it is better to keep old credit accounts open and avoid applying for new ones.
Bad credit scores result when you have unpaid bills. This includes your non-payment for tax liens, judgments and application for bankruptcies. This will appear on your credit report and will lower your credit score.
In order not to get a bad credit score, 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%), amount of debt (30%), length of credit history (15%), new credit lines (10%) and types of credit used (10%).
It is very possible to raise a bad credit score into a good one. It can’t be done immediately or overnight, but it can be worked out with patience and hard work. Start working on the factors that can affect your score and address each for improvement.