It is important to know how a person’s credit score is determined. In the US credit score is determined by Fair Isaac Corporation (FICO). They obtain information about an individual from three credit bureaus, Equifax, Experian, and TransUnion. FICO calculates the credit score by giving different weight age to different factors. Payment history is given 33% weight age. Payment history is the information of defaulting on repayments. The total debt including all instruments like mortgages, bills in collection, credit cards, judgment and other debts owed by the individual is the second ingredient which gets 30% weight age. The third is the credit history and is the period from when the oldest credit account noted in the report to the present loan application and gets 15% weight age. The fourth factor is the credit mix a measure of the different types of accounts the person has borrowed from, and it gets 10% weight age. Mortgages, car loans, a line of credit fetch higher scores than a credit card which is considered the lost of accounts. 10% weight age is given to new credits and means the recent number of credit inquiries made or a number of new accounts opened. An individual’s credit score determines his creditworthiness. Lesser the score lesser is the creditworthiness. Generally, the score varies between 300 and 800 and a score less than 579 are considered a poor credit and loans to this segment are poor credit loans. Those in the range of 580 to 600 are considered fair. Even though they are labeled fair, individuals in this range face high-interest rates or face many hurdles in securing a poor credit loan. In a practical sense, credit score is a measure of the difficulty one would have in securing the loan one wishes. Each lender decides the risk he likes to take. An average rating in the mid-600s or early 700s may not be good enough to get a mortgage.
Poor credit is not the end of the world. The arduous long-haul solution is to mend one’s bad financial habits. Work hard and ensuring that repayments do not default. Paying installments in time is the important criterion in improving your credit score. One can manage to get poor credit loans from different agencies that deal with the segment of poor credit loans. Put these loans to good use and earn better, redeem the old debts. One can take the tough road to travel, not an impossible one.
There are law houses who specialize in reviewing credit ratings by highlighting an individual’s unique requirements of a poor credit loan, submit a program for improving the credit ratings and convince the lenders and get a loan with better interest rate and repayment schedule. Of course, one has to be prudent to follow the agreed path. They will help one to improve credit score with required strategies. The companies have experienced paralegals that are available by phone or email, which will discuss issues and help with tips. There are organizations lending working capital to small and medium enterprises. The underwriting of these companies is based on the applicant’s business performance and not on credit rating. Some companies assure candidates up to $500,000 within three days.
Another segment is payday loans. These companies cater to the urgent requirements of finances to meet urgent unavoidable expenses. These are exceedingly short-term loans with repayment on the next payday whenever it is. These loans do not require any credit check from major credit bureaus; do not have credit cards, bank overdrafts, and other charges. Repayment terms are easy, and loan processing is simple and fast. Another major advantage is it protects one’s credit rating by enabling timely payments of other dues. Payday loan websites are by far the most popular. One can find payday loan stores fairly easily. Payday loan amounts vary anywhere up to a thousand dollars with repayment due in a fortnight to a month. There is intense competition, and it is only prudent that one does due diligence about the lender.
Another segment is online agencies that give poor credit loans. The task is to find a company that is transparent about rates and fees, willing to look you not through the credit rating score and flexible on terms. Many of these agencies are not lenders by themselves but are facilitators. These companies put loan applicants in contact with fairly reliable poor credit loan companies.
A low credit rating by itself is not the end of the world. There are avenues to secure loans in spite of difficulties encountered in securing loans. One has to be prepared for high-interest rates of 20% or more and be sure to pay dues in time. It is imperative that mend one’s ways and improve one’s financial status.
