Credit Score

The Relationship between Credit and Loans

Traditionally, loans and credit records are inextricably linked. Your credit score can determine which loans you can access, how much you can borrow, and what interest rates you'll pay for the service if you do indeed qualify. However, with short-term financial services, these reports do not play quite so prominent a role in many cases. For this reason, advances for bad credit are far more accessible with certain short-term borrowing options, including title loans, payday loans, cash advances, and some personal loans. Read on for a simple explanation of how credit checks interact with the borrowing process, and what options are available to people with financial challenges.

The Basics

A score fundamentally is a numerical representation of how well you've paid your financial obligations in a timely manner. The number comes from a complex algorithm that accounts for factors like outstanding debt, timeliness of payments, the types of loans you have, the amount you are eligible to borrow, and more. The score is a three-digit number that can range from 300-900. All three credit bureaus in the United States—Equifax, Experian, and TransUnion—compute these scores for consumers. Each bureau calculates the score in a slightly different way, however, and the numbers can also vary among the bureaus because the reports each entity has may reflect different information.

Estimated Credit Ratings

While you cannot access your score for free, you can request a free report from each bureau once a year. You can also pay a small fee when you do so if you'd like to know your score. Unless you apply for a no credit check loan, your lender may request your score from one or more of the bureaus before offering you funds. Lenders use the numbers for two purposes: 1) to see if you qualify to borrow, and 2) to determine what interest rate to charge you based on the level of risk you represent as a borrower. With the exception of title, payday, and similar no credit check loans, most lenders require a qualification period in order to qualify for service.

You can improve your number in many ways. The simples and most effective way is, of course, to pay your bills on time consistently. You can also help your score by minimizing the percentage of your available credit that you're actually using. Carrying a diverse mix of credit can also help your score. For example, having an installment loan on your report in addition to cards can boost your score. On the other hand, you can also harm your score by failing to make the agreed-upon payments on time and carrying too much debt. If you are just beginning to borrow, your score will start to rise once you've established longstanding accounts.

Cash advances are a unique type of product because you typically must have a card in order to obtain one, and you must pass a check in order to receive a traditional credit card.

With a no credit check loan, the lender is often not too concerned with your report because it has some other risk-management tool built in to the product. For example, with title loans, the lender has the security of your vehicle's title, which would allow it to repossess the vehicle if you defaulted. Likewise, with payday advances, the lender has the security of being able to automatically withdraw repayment from your next paycheck. With traditional borrowing services, however, the lender wants to see a solid score to ensure that you will repay the balance on time. Keep in mind that advances without a credit check tend to have higher interest rates than those that require a thorough check. They are more accessible, but they are also usually more expensive.

Diverse Borrowing Options

While these checks are fairly commonplace in the lending industry, financial challenges don't necessarily preclude you form borrowing. Diverse lending options are readily available from our trusted affiliates. If you want to borrow funds but are concerned you wouldn't pass a thorough check, consider looking into bad credit payday or title loans. Cash advances and installment or personal loans may be options as well, but borrowers with checkered histories tend to have more success with payday loans.