Will I Get Charged More If I Have A Bad Credit Score?
There is much speculation surrounding credit scores and what they definitely impact throughout our daily lives. Many people who do not necessarily understand much about them may also find it difficult to identify what could potentially impact their rating. Whether you get charged more or less for having a high or low credit score will depend on multiple factors. One of which includes the lender themselves as different businesses will have different values and principles they work with. Speaking on behalf of every lender across the US is impossible, therefore, here are some commonly asked questioned regarding bad credit loans and credit scores.
What is a credit score?
A credit score is a number that proves your creditworthiness to those who are offering the credit. This number is based on a person’s credit report and how they perform with their own finances. Specifically, when applying for a payday loan, lenders will view your credit score to determine your eligibility. This shows whether or not you are a financial risk or not to the lender.
What impact does a bad credit score have on borrowing a payday loan?
Having a bad relationship with your finances can hold you back in many ways, more than you may even think. The importance of credit scores is constantly rising as the demand does too. But, how exactly could having a low credit score impact your borrowing experience?
Mortgages
If you are looking to purchase a home, you will have to consider all the surrounding aspects. Having a good score to secure a mortgage is essential as the higher your score, the more likely you are to be offered a better deal. But, you’re credit score is not the only thing that a mortgage lender will look at. In fact, it is equally important for them to browse other bases. Therefore, leading to them reviewing aspects like your incoming and outgoings and even other characteristics like council tax, etc.
Phone Contracts
Phone contracts are another kind of fixed payment that bases decisions on your credit score. You will notice, when attempting to take out a phone contract, the provider will conduct a credit check. In order to move forward, you must pass the check. If you have a lower score and you are unsure whether you will pass or not, the value of the phone you are wanting will impact how much your credit matters.
Payday Loans
Thankfully, there are many lenders across the country who offer payday loans for those with bad credit scores. Everybody comes from different financial backgrounds and in order for everybody to feel welcomed and guided, offering as much as possible is important to many lenders. Despite lending to those with lower credit scores, people with higher digits may find the process easier, shorter, and even cheaper.
What can lower your credit score?
There are multiple things that can have a negative effect on your score causing it to decrease. In fact, many things which you probably wouldn’t even expect. Some of the most common aspects include:
Missed Payments
Missing a payment or paying it later than the specified due date can cause negative changes to your credit score, just like how on-time payments can equate to positive ones. The later your payment is, the lower your score could end up.
No Credit History
Having no credit history will most likely equate to a low number or even no score at all. Your credit score is built through multiple consistent bills and payments. If you haven’t ever used credit, or you haven’t used it in a long time, you could potentially be classified as somebody with ‘no credit history’.
Applying Too Frequently
Whenever you apply for credit, a lender will conduct a hard credit check to see if you are a safe borrower. However, hard checks have many downsides. Every time they are conducted, a few points could be knocked off your credit score causing it to decrease.
With your score decreasing, lenders may see you as more of a threat. Therefore, they may potentially increase the percentage of interest on your specific loan, meaning that you may be paying more than somebody else with a higher score. So, how can you prevent this from happening?
How can you improve your score?
Improving your credit score takes time and consistency, it isn’t something that can just happen overnight with one change in your financial awareness. Thankfully, there are many ways in which you can increase your score, and some of them are easier than you may have guessed. For example:
- Pay bills on time
- Dispute credit report errors
- Become an authorized user
For more ideas regarding repairing your credit score, click here.