A credit score is a common phrase that creditors use to know their borrower’s state of credit. Credit score numbers ranging from 300 up to 850. The higher the borrower’s credit score, the other the chances of getting a better deal on a loan.
In contrast, lower credit scores contemplate that the borrowers have not been paying their loans on time. And that is a good reason to turn off lenders from giving such borrowers a loan. Credit Repair Help will repair your low credit score.
The Credit bureaus review your credit history and how good you have been to the lender to get your credit score. For example, if you have a good record of repaying loans on time, your credit score will be high.
Origin of credit score
The Fair Isaac Corporation (FICO) brought the idea of credit score into the lending organizations. Since the start of FICO, most lending institutions have used it to determine the creditworthiness of their customers before giving them a loan.
Classifications of credit scores
- 300-579 is poor
- 580-669 is Fair
- 670-739 is Good
- 740-799 is Very Good
- 800-550 is excellent
The creditors will know what loan to give you according to your payday loans nz with the classes mentioned earlier. In addition, your credit score can also determine the Annual Percentage Rates (APRs)that you pay for specific loans.
For instance, those with Very Good and excellent credit scores will get loans with lower APRs, and the reverse is true. Is it possible to get payday loans online no credit check with instant approval.
How do credit bureaus calculate credit scores?
We have three main credit reporting bureaus in the USA, which are:
- Experian
- Equifax
- Transunion
There is a criterion that they use to calculate your credit score. First foremost, your lenders will have to report your credit information to one of the three credit bureaus.
To calculate a credit score, the credit bureaus use:
1. Your payment history
The lenders report to the credit bureau how you have been paying your owed amount. If you have been making early or on-time payments, that’s better. The credit bureaus will take the average of your payments on all reports from different creditors
2. Length of credit history
The credit bureaus will also want to know for how long you have been taking credit. The longer the period, the better or worse your credit score will be. Of course, depending on your relationship with the lenders.
3. Types of credit
The credit bureaus will also use the types of credits you have been applying. For example, we have auto loans, mortgages, or even payday loans. That will determine whether you have installment loans or revolving credit.
4. New credit
The credit bureaus will also know whether you are new to borrowing and what has been your behavior since you started. In addition, the credit bureau will also see the amount that lenders owe borrowers, and they will also use it to determine the credit score.
How does credit score help in fast payday loan approval?
Payday loan lenders such as guaranteed payday loans no matter what Australia don’t use credit scores to evaluate their borrower’s potential to pay the debt. Instead, they mostly rely on your checking account history, proving a consistent source of income.
However, if you don’t repay a payday loan on the agreed time, it will affect your credit score. But if you repay on time, it won’t help you to rebuild your credit score.
The good thing about payday loans is that you can get a loan with a bad credit score. So, poor or fair credit scores should not limit you because you can quickly get a payday loan.
Final words
Always ensure that you maintain a good or excellent credit score. And you will be able to get loans with fair APRs. There are also credit repair firms that may help you to start rebuilding your credit score and you can check them out. Once you have high credit scores, you will get loans with better deals than a lower credit score.
