Even when you are employed, you may find yourself in a situation where you need to take out a loan. The most unfortunate experience is to be denied the loan you need because of bad credit. Sometimes, payday loans bad credit or personal loans with bad credit can be a solution to certain short term financial issues
“What is bad credit?” you may ask. By definition, bad credit is when you have a record of past failures to keep up with payments concerning your credit agreement. With such a record, you will be unworthy of receiving the new credit you need as you haven’t yet paid your previous loans or your other obligations on time. In addition, your credit report takes into consideration bankruptcies, tax liens or your financial information.
Would Payday or Personal Lenders Know About Bad Credit?
You may wonder how your loan lender will know about your previous unpaid loans. Here is how they find out if you have pending unpaid payment obligations:
Credit bureaus or credit reporting agencies collect every borrower’s credit history. They then compile it into what is called a credit report. Since each agency maintains a separate credit report of the borrower, your financial history and credit score may differ from one agency to another as there could be omitted information. So, while these reporting agencies have all the information about your actual credit accounts, you will not be able to find any credit score on that credit report. Therefore, obtaining payday loans with bad credit could pose a challenge.
This is why, when talking about credit, we are looking at the level of trust potential lenders have that you will pay back the funds you are borrowing. When you have bad credit, you should be prepared for the worst: no lender may accept to lend you the money you need. But if you had outstanding credit, many banks and credit companies would even beg you to borrow from them. Typically, that is what happens when you borrow money from banks: you either beg loan lenders to trust you with their money when you have bad credit or you have them beg you to borrow from them when you have outstanding credit. Then, whatever your situation may be depends on your financial needs and unexpected expenses. But, there is an alternative option in payday loans bad credit. Further, personal digital loans could be an option as well.
Payday Loans & Bad Credit Is Not An Ideal Combination
As many loan lenders look at potential borrowers differently in accordance with their needs, the Fair Isaac Corporation (FICO) developed software and algorithms to calculate the credit score needed for the lenders to consider a borrower’s loan application. The credit scores that are calculated according to the lender’s needs range from 300 to 850. For you to qualify for the loan, your credit score should be above 670 when calculated by FICO—a credit score below 650 is considered lower than the acceptable; this means you have lousy credit.
What could be the contributing factor to lower credit score? That is a good question; a lower credit score is caused by negative records or late payments. If you then pay your loans later than expected, that can result in lower credit score when calculated by FICO. This can happen if, for example, you haven’t paid your medical bills, and the collection agency reports your unpaid bills to the credit bureaus. Yes, even if the hospital does not report your financial situation, the collection agencies can report your bad financial history.
How Do You End Up With Bad Credit?
You can end up having bad credit if you have financial problems that force you to file bankruptcy, charge up high balances on credit card, have a vehicle repossessed, etc. These problems can trigger multiple negative events in a very short time period—the other short-term negative events include the real estate foreclosure and tax lien; they, too, can make loan lenders hesitant about helping you with the money.
Again, because of having poor credit, loan lenders will find it hard to provide you with the funds you need as you may repeat the same mistake with them; that is, the loan lenders will fear that you will not be able to repay your new loan. In this situation, you should expect two things: one, obviously, is to have your loan application rejected; two is to have your loan application approved yet be charged a much higher interest rate than would the borrowers with good credit scores.
As a borrower with bad credit, you should not be surprised when charged exorbitant interest rates; after all, that is the lender’s way of compensating themselves for taking the risk of lending you the money you have requested.
Consequences of Having Bad Credit
Although you are aware that having bad credit is really bad for you, you also need know that your poor credit may affect more than your credit card; it can affect other areas such as your loan approval and interest rate, insurance rate as quoted by some insurance companies, security deposit as charged by both utility and cell phone providers and landlords during your rental agreement. In some cases, instead of charging you a high security deposit when paying for a lease, your landlord may choose to turn you down because of having bad credit.
Final Thoughts About Payday Loans Bad Credit
If you have had a hard time getting loan lenders to accept your loan application, then the one thing you could consider is personal digital loans or certain types of payday loans. In fact, in addition to solving your poor credit by removing negative information either with a credit report dispute or with your credit report as you add new accounts and pay them on time, you can sometimes apply for a payday loan or personal loan even when you have bad credit.
Payday loan and personal digital loan application processes are typically straightforward. You need not fax any paperwork or forms; you just need a computer on which you can send your necessary information to your payday loans. For your payday loan or personal loan application to be accepted, you need to have a personal bank account and a valid income source, which could be your work or small business; you need to be sure you will be able to repay your loans with your salary next month. Above all, you need to be a Canadian citizen. Then as you find a good payday loan lender, they will review your loan application and respond to you within 24 hours. If accepted, payday loan or personal loan lender will send you the funds within a short time period.
