February 8, 2021
What You Need to Know About Your Credit Score, and How No Credit Check Loans Can Help
Credit scores are surrounded by mystery. For many, it feels like there’s some secret organization somewhere that concocts a formula that can make or break you when it comes time to secure a loan for a home or car. At Midwest Title Loans, we want our customers to be well-informed, so we’re here to uncover some of the mystery surrounding this golden number. Specifically, we’ll talk about some of the key factors that define your credit score that are within your control. These factors include payment history, amount of debt, recently obtained credit, length of credit history, and the types of credit you’ve obtained.
Let’s examine FICO scores a little closer and review the top five influencers on credit score in a little more detail.
First thing’s first – what the heck is a FICO score?
The Fair Isaac Corporation (FICO) score is a standardized way to classify people regarding their creditworthiness. It ranges from 300 to 850, with 300 being bad and 850 being perfect. The exact formula for arriving at scores is a trade secret, but certain things are known. For example, getting a high FICO score requires an excellent payment history for a mix of different types of credit accounts (e.g. mortgage, credit cards, title loans, credit cards, and short-term loans).
Good credit history refers to on-time payments, not maxing out credit cards, and other factors, such as carrying a low amount of total debt. Conversely, a bad credit score is the opposite, with no diversity in the types of credit, late payments, maxed-out credit cards, and an enormous amount of total debt.
Generally, a score between 670-740 is considered good. Lower scores between, say, 580 and 670 may cause lenders to approach with caution.
So, what are the most important things that determine your FICO score?
No. 1: Payment History
Payment history is by far the most critical attribute. Lenders want to know if their borrowers are reliable and consistent in their repayment of debt. They look at late payments in 30-, 60-, and 90-day increments, where the later the payment is, the worse it is for your score. They also look at any accounts that have been sent to collections, bankruptcies, garnishments, foreclosures, and legal actions that may have been taken against you regarding debt. The better you are at avoiding these things and paying on time, the better your FICO score will be.
No. 2: Amount of Debt
Even with a great payment history, everyone has a credit limit. Even billionaires can only owe so much before lenders think twice. To get a good FICO credit score, you can’t be near or at your “available credit” limit. Your available credit is a line drawn in the sand where debt begins to overtake one’s assets. Debt from all accounts (e.g. mortgages and credit cards) is included. The score looks at all that you owe in total.
No. 3: Credit History Length
People aren’t born with a credit history. It has to build over time. This factor looks at how long you’ve had at least one line of credit over the years. It considers things like the average age of your accounts and how far your oldest account goes. Naturally, a long history of on-time payment is better, but a short history can be good as long as it’s paired with an excellent credit history.
No. 4: Credit Types
The FICO score is looking to see a “mix” of different credit types. Lenders like to see that borrowers have been consistent in repaying different types of loans such as home mortgages, auto loans, credit cards, store accounts, and other debts including local store types of credit. Showing consistency across a spectrum of creditors is better than just being consistent with one type of debt (e.g. having just a home mortgage). This isn’t a major factor in determining your credit score, but it matters enough to be noteworthy.
No. 5: Amount of New Credit Accounts
The number of new credit accounts you have is taken into consideration by FICO. While this factor isn’t huge, it also matters. Lenders may be concerned if you’ve opened several recent accounts. People experiencing cash flow difficulties often rapidly take on more debt. This can make you a greater credit risk.
Repairing Your Credit With Title Loans in Kansas City
If your credit history doesn’t look the greatest, no need to worry. Nobody is perfect, and credit scores can be changed over time. Even with bad credit, you can get title loans and other short-term loans to build an excellent credit history. Midwest Title Loans of Kansas City is an outstanding example of a loan institution that can get you quick loans with simple, no-nonsense repayment terms. This not only gets you the money you need now, but it also helps you build your credit over time. We have a couple of options to choose from when it comes to low credit loans, and the first step to getting started is to fill out our online application. One of our knowledgeable lending experts will be in contact with you to help you determine the type of no credit check loan you need to get you back on your feet. Get started today!