Everyone on the lending market constantly talks about credit score. Good, bad, no score; you hear those words very often but do you understand their impact on your life? Each lender will tell you a different version of your credit score’s importance, so let me help you out a little. Here is a summary of how a bad credit score does and doesn’t ruin your financial life!
Why is a Credit Score Important?
A credit score is a number as low as 350 and high as 800, which shows how creditworthy a borrower is. The higher is the number, the more chances you have to get approved for any loan to which you apply. But why does the lending market put so much emphasis on the credit score? First of all, traditional lenders, such as Banks and Credit Unions, approve only people with a good credit score, usually 700 or higher. This way, they are sure that you will repay your loan correctly. Traditional lenders also determine interest rates, fees, and other costs based on your creditworthiness. It is easy to say that the importance of this 3-digit number plays a huge role when you need to take a loan.
What Options do You Have With a Bad Credit Score?
Even though the credit score is very important, not all lenders focus on it or even check it. People with bad credit can also be borrowers, as they have the option of no credit check loans. Many online lenders can easily offer loans for bad credit with a high approval rate. Even with a low credit score, you can get instant loans for bad credit. How is this possible, you ask? Where traditional lenders focus on the credit score, online lenders focus on the source of income. Mostly for short-term loans, such as payday loans, lenders don’t care about your overall score, as the repayment time is short. They rather check your ability to pay back based on your steady income. If you prove you can repay on time, you can easily take guaranteed payday loans from a direct lender. You may also be eligible for installment loans, personal loans, and many more.
How to Improve Your Credit Score?
Having options for bad credit is a lifesaver, but it would be nice to have a good credit score in the bigger picture. There are a few things you can start doing today to improve it. Pay off your bills on time, get extra credit for making utility bill payments on time, and repay all your debt. At the same time, be aware not to close off the credit cards you haven’t used, as it affects your score as well. It is not an overnight goal to completely rebuild your credit score, and it might take from two to ten years to achieve that aim. However, if you start doing it step by step, you will have extra points every month, which will already enhance your score. Remember that no one jumps from a bad credit score to a good one. Still, as you go through the “fair” and “good” stages, you already get more opportunities in the lending market.
A bad credit score does affect many niches of your life, but it’s not the end of the world! You can enjoy your lending options for bad credit, and in the meantime, work on enhancing your score for the future!