Why is it that your credit score does not matter to payday loan lenders online or at a storefront location? It is well known that these low cost payday loans provided are not approved based on your credit history, but many do not understand why this is so. To help understand this, you need to understand what your credit history shows and why.
Payday loan lenders will not do a credit check for payday loan approval.
Your credit score is a number, based on individual reporting agency algorithms. The numbers fit into set creditor ranges to rank a person in the financial world.
According to FICO:
- Excellent credit range is 720-850
- Very good range is 700-719
- Average credit is 675-699
- Sub-prime credit 620 -674
- Risky range is 560-619
- Very Risky credit is 500-559
Where do you fit? Most often, if you can keep your credit score about 660 you will be considered for most credit options. The interest rates attached to any credit will be determined by where in that bracket you fit. Obviously, the higher the credit score, the lower your interest will be. If your score falls between 620 and 659, you will find some creditors who will be willing to help out, but you will probably be asked to provide collateral or a co-signer. When your credit is below 620, finding someone to give you credit becomes even more difficult.
There are three major credit reporting agencies and they each have their own algorithms for figuring the scores. Creditors will usually request information from one of the agencies. If that score is one of the lower ones, you could possibly be denied funding or given a much higher interest rate.
Payday loan lenders do not use your past history to loan money. Why? This information rates your management of long-term funding. Since this low cost payday loan is expected to be paid off in just a few short weeks, your long-term money management is not relevant. The term of the loan is so short that it never gets reported as debt. A credit score has no relevance to payday loan lenders. The only time your credit will see negativity is if you default on your loan, refuse to work with the lender and the debt gets sold to a collections agency. The collectors will report the defaulted debt and your score will be negatively affected.
You will want to have good money management skills with your bank accounts. This is the area that online payday loan lenders will search for approval status. How do you manage your income direct deposits? Are payments made without NSF fees attached? How many other payday loans do you have out and when are they due? Payday loan lenders will look at your finances in the here and now. A typical loan term lasts two weeks, so your past history does not apply. A responsible payday loan lender accepts that good people go through bad money times and everyone needs options to improve their situation.
Spotya! Online Payday Loans is a responsible lender doing just that. Customers will find some of the competitive interest rates for the low cost payday loans online.
