| Frequently Asked Questions About Cash Advance Payday Loans | The Relationship between Credit and Loans

The Relationship between Credit and Loans

Traditionally, loans and credit records are inextricably linked. Your credit score can determine which loans you can access, how much you can borrow, and what interest rates you'll pay for the loan if you do indeed qualify. However, with short-term loans, credit reports do not play quite so prominent a role in many cases. For this reason, loans for bad credit are far more accessible with certain short-term borrowing options, including title loans, payday loans, cash advances, and some personal loans. Read on for a simple explanation of the basics of credit, how credit checks interact with the borrowing process, and what options are available to people with credit challenges.

Credit Basics

A credit score fundamentally is a numerical representation of how well you've paid your financial obligations in a timely manner. The number comes from a complex algorithm that accounts for factors like outstanding debt, timeliness of payments, the types of loans you have, the amount of credit available to you, and more. The score is a three-digit number that can range from 300-900. All three credit bureaus in the United States—Equifax, Experian, and TransUnion—compute these scores for consumers. Each bureau calculates the score in a slightly different way, however, and the scores can also vary among the bureaus because the credit reports each entity has may reflect different information.

While you cannot access your credit score for free, you can request a free credit report from each bureau once a year. You can also pay a small fee when you do so if you'd like to know your credit score. Unless you apply for a no credit check loan, your lender will request your credit score from one or more of the credit bureaus before offering you a loan. Lenders use the score for two purposes: 1) to see if you qualify to borrow, and 2) to determine what interest rate to charge you based on the level of risk you represent as a borrower. With the exception of title loans, payday loans, and similar no credit check loans, most lenders require a credit check in order to qualify for a loan.

You can improve your credit score in many ways. The simples and most effective way is, of course, to pay your bills on time consistently. You can also help your score by minimizing the percentage of your available credit that you're actually using. Carrying a diverse mix of credit can also help your score. For example, having an installment loan on your credit report in addition to credit cards can boost your score. On the other hand, you can also harm your score by failing to make the agreed-upon payments on time and carrying too much debt. If you are just beginning to use credit, your score will start to rise once you've established longstanding accounts.

Credit Checks and Loans

Of the products our lenders have to offer, only some require credit checks. For the most part, title loans and payday loans are known as loans with no credit check. By contrast, most personal loans do require a credit check because no collateral is involved, making the transaction riskier for the lender. Cash advances are a unique type of product because you typically must have a credit card in order to obtain one, and you must pass a credit check in order to receive a traditional credit card.

With a no credit check loan, the lender is not concerned with your credit report because it has some other risk-management tool built in to the product. For example, with title loans, the lender has the security of your vehicle's title, which would allow it to repossess the vehicle if you defaulted. Likewise, with payday loans, the lender has the security of being able to automatically withdraw repayment from your next paycheck. With credit check loans, however, the lender wants to see a solid credit score to ensure that you will repay the loan on time. Keep in mind that loans without a credit check tend to have higher interest rates than those that require a credit check. They are more accessible, but they are also usually more expensive.

Bad Credit Loan Options

While credit checks are fairly commonplace in the lending industry, credit challenges don't necessarily preclude you form borrowing. Bad credit loans are readily available from our lending affiliates. If you want to borrow funds but are concerned you wouldn't pass a credit check, consider looking into bad credit payday loans or bad credit title loans. Neither type of loan requires a credit check, so even those with poor credit histories can still qualify in most cases. Bad credit cash advances and bad credit installment loans or personal loans may be options as well, but borrowers with checkered credit histories tend to have more success with payday and title loans. Remember that while these types of loans do not require a credit check, they will still appear as a negative item on your credit report if you fail to repay the loan as agreed.