How a Bad Credit Score Affects Your Loan Approval

Having a bad credit score can have a considerable impact on your ability to get approved when applying for a loan. When you need a loan, but your credit may be holding you back, it’s helpful to understand how that’s happening. We’re going to look at how a damaged credit history can have lingering effects on loan approval odds for a long time. We’ll also look at some of the potential solutions for those in need of financial assistance. In the end, we’ll look at why Lending Bear should be your choice for finding funding with a bad credit score.

Why Is A Bad Credit Score Something To Worry About?

When it comes down to it, a credit score is an estimate of an individual’s overall creditworthiness. It is calculated from a complex array of factors and represents a numerical summation of your entire credit history. As with most other scoring models, higher scores are better, and lower ones are worse.

Higher scores represent a consumer that is more likely to pay their obligations on time, and to settle their accounts as agreed. Lower scores indicate more financially risky consumers, who may be more likely to make late payments, miss payments, or even default on lending agreements. This is why it’s important to fix a bad credit if you need to work with traditional lenders like a bank or credit union.

Factors That Impact Your Credit Score

Credit records can be complicated, and credit score calculations can be incredibly complex. That said, some factors are known to contribute to a bad credit score, including:

• A history of late or missed payments with creditors or lenders
• A high credit utilization ratio
• Multiple credit inquiries
• High debt-to-income ratio
• Bankruptcy and other negative public records

If you know that you have any of these on your credit report, they are great places to start repairing your credit. Each one is a major factor in score calculation, with on-time payments being the most heavily weighted factor of all.

The Impact Of A Bad Credit Score On Loan Approval

Higher Interest Rates

Lenders looking at a potential borrower with a bad credit score are more likely to mitigate some of that risk by adjusting the interest rate upwards. This increases the overall cost of borrowing for the consumer, which makes it less likely that they’ll take a risky loan out. Many borrowers will use short-term lenders when their score isn’t high enough for traditional lenders.

Limited Lending Options

Having a bad credit score can limit the types of loans or lenders that you can use. Many traditional lenders, like banks, have strict eligibility requirements that include credit score minimums.

Shorter Repayment Periods

If you have damaged credit, you may not be eligible for longer repayment terms. This makes the monthly payments higher and can decrease the affordability of the loan.

Loan Security

In some cases, lenders may require collateral to secure a loan. Others may require a cosigner to be equally responsible for the loan.

Overcoming the Challenges of a Bad Credit Score

If you have a bad credit score and need urgent funding, there are still some options. Take a look.

• Payday Loans – Payday loans are short-term loans that are meant to be paid back within two to four weeks, or by your next paycheck.
• Installment Loans – Installment loans are larger short-term loans that are designed to be paid back over a few weeks to a few months.
• Pawning Items – Pawning items is a great way to get emergency funding, secured by assets or collateral you already own.

You’re More Than A Bad Credit Score To Lending Bear

Good credit is hard to keep, and one or two mistakes or emergencies can ruin credit for years. That doesn’t mean that you shouldn’t have access to reliable, emergency funding. Reach out to Lending Bear to get started. Cash when you need it, fast and friendly!