Needing a loan already means you’re in a tight financial situation, but when you have bad credit the situation can seem even more intense and restricting. At Your Loan Depot in Texas, we still approve loans for people with poor credit. If you need a bad credit loan, feel free to contact us to see what we can do.
Have you ever been curious about how your credit score is determined though? If you know exactly what’s contributing to your bad credit, then you can know what changes to make to improve it.
FICO® Scores are always determined and calculated by negative and positive information in your credit report. Most people know that a late payment will negatively impact their credit scores, but FICO actually outlines exactly what factors affect its calculations.
Payment History: 35 Percent
You guessed it: that late payment (or two or three…) carries a lot of weight with your credit score. Any lender you go to for a loan wants to see that you paid past bills and credits on time.
If you’ve messed up a lot of payment dates, though, the good news is that credit scores will notice if you establish or reestablish a good track record of making payments on time. So if the last time you missed a payment deadline was a year or two ago, FICO will notice and won’t damage your score as much as if you missed last month’s payment date.
Because of how much weight is given to your payment history, the best thing you can do to initially improve your credit score is make your payments on time — even if you’re just paying the minimum amount due.
Amounts Owed: 30 Percent
If you owe a lot on your credit card or previous loan, that doesn’t mean you’re automatically going to have a hard time getting a payday loan in Texas. However, if you’ve used a large percentage of your credit limit, it can indicate to your potential lender that you’re more likely than another person to make late payments or fail to pay altogether.
The total balance on your last statement is the amount that your credit report takes into consideration.
Length Of Credit History: 15 Percent
We see a big drop in the weight of this item and the previous factor. Different aspects will be considered with the length of your credit history:
- How long you’ve had your credit accounts
- The age of your oldest account
- The age of your newest account
- The average age of all of your accounts
- How long you’ve had specific accounts
- How long it has been since you used certain accounts
Longer credit histories generally improve your credit score because it shows your patterns, payments, and reliability over a longer amount of time. However, if your credit account is new but the rest of the factors are OK, then your credit report will most likely be fine.
Credit Mix: 10 Percent
How many different credit accounts do you have? Credit scores look into this. They’ll consider your credit cards, installment loans, mortgage loans, and even your retail accounts.
Having very few or very many credit accounts won’t be a huge determiner in your credit score, and you definitely don’t want to open credit accounts that you won’t use. This factor is generally of most use when there’s not much other information on which to base a score.
New Credit: 10 Percent
This factor is similar to the length of your credit history. If you open several new credit accounts in a short time, your credit score may be at risk (especially if you don’t have a long credit history from other credit accounts).
To protect yourself from this in the future, be careful with how many new accounts you have at once. You score won’t drop drastically if you apply for new credit, but it’s more likely to drop more if you open several new accounts rapidly.
These percentages aren’t quite as cut and dry as is listed here, but it’s a good starting area. A category’s importance can vary per person, especially if you don’t have a long credit history.
At Your Loan Depot, we offer some of the best loans for bad credit. If you find yourself asking “Where can I get a loan with bad credit?”, then we hope you’ll think of us. We offer title loans and payday loans to help you get back on your feet, and we’re in ten locations throughout Texas. Now that you know how credit scores are determined, you can better work to improve yours.
