Author: Emily Ferreira
Believe it or not, having no credit is just as detrimental to getting a loan as having really bad credit. Neither alternative shows potential lenders a history of payments being made on time, which is the determining factor in being approved to borrow money. In fact, monthly income is almost irrelevant if a person has no proven history of repaying their past debts.
This can be very frustrating for someone who has just begun their first job. People in this situation often wonder how they can build up their credit rating if they are unable to get credit at all. That’s a great question! One of the quickest and easiest ways to build new credit is by taking advantage of a payday cash loan.
To qualify for a cash advance loan, a person must be an American citizen, have a checking account, and earn a certain amount of steady income. With these three criteria, almost anyone can be approved for this type of loan. Applications can be done in person, over the phone, online, or even by fax, making them very convenient as well.
The reason payday cash loans are good for helping build credit is because the term of the loan is usually no more than two weeks. Because of the short loan term, a person could have many opportunities to borrow money using this type of credit. If the borrower repays each loan on time, this could be an excellent way to develop their credit report and to start proving they are financially responsible.
Payday cash loans can also be used as one of the steps in repairing bad credit. If a person has had trouble making payments on time in the past, a few payday loans that are paid back on schedule, can instantly improve their credit rating. After all, these loans will be the most current transactions shown on the credit report. Establishing any kind of new credit, and being responsible with it, is a great way to show lenders a borrower may be worth a second chance.
Other steps to take in building up a bad credit rating may include closing out credit cards that aren’t being used. If a person has too many credit card accounts, even if some of the balances are zero, this can have a negative effect on their credit rating. Payday lenders must use any credit available to potential borrowers when figuring debt-to-income ratios. If these ratios lay outside the lender’s guidelines, new credit may not be granted.
Paying any bill past its due date is also something to avoid, as is flat out non-payment. If a person hasn’t made timely payments in the past, it is pretty likely they won’t in the future either, at least that is the view taken by most lenders. Now is the time to make sure all payments are current. It is never too late to make this financial goal a reality.
Applying for a lot of new credit is also a bad idea when trying to repair past credit problems. Every time a lender runs a credit check on a person, it affects their credit rating negatively. Besides, the last thing a person needs who already has credit problems is more credit.
Having a good credit rating is very important. Even the best financial planners cannot avoid the unforeseen circumstances that affect people every day. For instance, if a person’s car dies, they can either repair it, or buy another one. If that person has bad credit, or even no credit, they may not be able to make either choice. Lenders will probably not approve a new car loan, and most mechanics don’t have layaway plans.
Without a working vehicle, a lot of people may not be able to get to work, complicating the matter further.
Unfortunately, ours is a credit-based society. Having bad credit or no credit at all, can prevent a person from buying a home or even getting their utilities turned on. Unexpected problems can turn into unsolvable ones without the extra cushion that good credit provides. So, whether a person is just starting out, or they have stumbled along the way, it is imperative to continue on the path towards good credit. Personal loans could be one of the steps needed along this journey. This quick, inexpensive loan could easily help propel a person into a brighter credit future.
