A credit rating is the number used by lenders to determine if a person is a good debt risk. It can determine if an applicant is eligible for a home loan, car loan or credit card. A good credit rating is a bonus for a prospective borrower. For those who need fast cash loans, having a good credit rating will improve their chances. Taking out payday loans and repaying them on time, can help improve a credit rating as well.
1. What is a credit rating?
A credit rating is a number that is assigned to a person, aged over 18, based on their history of paying bills, repaying loans and meeting debts. It determines the probability that a person will repay a loan. A person’s credit rating is checked by banks, loan companies and other financial lenders before deciding whether to extend a loan.
2. How is a good credit rating established? A good credit rating is established by paying bills on time. It is helped by paying credit cards on time or by not spending the maximum regularly. Credit ratings can be improved by paying creditors all money they are owed, on the due date.
3. How does a payday loan work?
Payday loans are cash loans which are secured by the borrower’s wages. For example, a person can borrow a percentage of their regular wage before pay day for emergency situations. A finance company will check the applicant’s credit rating before loaning them money. If the applicant has a good credit rating then they are more likely to get a loan. The amount of the loan will be larger if their credit rating is good. A loan company will also check that the applicant has a steady income and check bank statements to confirm that fact.
4. Does taking out a pay day loan affect credit ratings?
Taking out a pay day loan can affect the applicant’s credit rating. In fact it can improve the rating if the customer repays the loan in the required time frame. The opposite is true if they do not repay the loan on the due date. Loaning money from a cash loan company is the same as loaning from a bank except the process is simpler and the interest rates differ.
5. Will having bad credit affect my cash loan?
Some companies will not loan money to a person with bad credit. Others will be happy to loan but may require some sort of security. The security could be an object that is worth the value of the loan. In addition, some companies will only loan small amounts to people with bad credit. The reason for this is that a person with bad credit is less likely to repay the loan. For some companies having a good employment history will overcome the disadvantage of having bad credit. But this decision is entirely at the discretion of the loan company. Pay day loans can be very useful for emergency situations. They can help with funerals, home repairs and business expenses. However, before applying for a cash loan, it is necessary for the applicant’s credit rating to be checked. The credit rating will affect the amount of the loan, the loan approval and the repayment requirements. A good credit rating aids greatly when dealing with financial institutions.
Author Bio: Tom Mallet is an Australian freelance writer and journalist. He writes extensively in Australia, Canada, Europe, and the US. He’s published more than 500 articles about various topics, including cash loans and payday loans.