Your credit score plays a major role in how lenders view your financial reliability. It affects everything from interest rates to loan approvals. Understanding how your score is calculated can help you make better financial decisions, especially if you’re exploring bad credit loans such as title loans or payday loans for fast cash.

This guide from Tennessee Title Loans, Inc. explains the five main credit score factors, how they influence your financial profile, and what options are available when your credit isn’t perfect.

What Is a Credit Score and Why Does It Matter?

A credit score is a three-digit number that reflects how you manage borrowed money. Most lenders rely on FICO scores, which range from 300 to 850. In general:

• Scores below 650 are considered fair to poor
• Scores above 750 are viewed as excellent

Your score can impact loan approvals, interest rates, housing options, and even insurance premiums. Roughly 90% of lenders use FICO scoring models, which pull data from the three major credit bureaus: Experian, Equifax, and TransUnion.

Keeping your credit in good standing helps with traditional financing, but when emergencies happen, alternative options like title loans and payday loans can still provide fast cash.

The 5 Key Factors That Make Up Your Credit Score

Understanding credit scores means knowing what is used to calculate your score. Having credit score factors explained can help when you are trying to understand why your credit is so low or how you can improve it. Learn more about credit score factors below to better understand your credit score.

The following are five credit score factors you should know:

1. Payment History (35%)

Your payment history makes up roughly 35% of your FICO score. It is the entire history of your payments on credit cards, loans, mortgages, etc. While making payments on time can increase your score, missing payments and how long you’ve left them unpaid can negatively influence your score.

If you fail to make a payment for 30 days after it’s due date, your credit score can drop moderately. However, waiting longer than 90 days can cause a 100+ point drop. If you’re looking to improve your credit score, check your latest credit report for missed payments and resolve any outstanding debts.

The following are some tips for avoiding missing payments:

• Set reminders and alarms when payments are due
• Automate your debt payments to ensure they come out automatically
• Budget for your debt payments every month
• Prioritize debt payments over other expenses

2. Outstanding Debt (30%)

Your outstanding debt refers to what you still need to repay. This accounts for 30% of your credit score. The more outstanding debt you have, the worse your credit score will be. Your credit utilization ratio is also considered when calculating your outstanding debt.

Your credit utilization ratio is determined by dividing the entire amount of credit you are using by your credit limits. The goal is to use no more than 30% of the credit available to you. If your credit utilization ratio is over 30%, creditors usually do not see that as favorable, creating hurdles for loan approval.

You can improve your credit score by paying down debt. Eliminating high-interest rate debt by paying more than the minimum monthly amount can help with your credit utilization ratio. You can also ask to increase your credit limit to minimize the impact of using a lot of credit.

3. Credit History Length (15%)

The longer you’ve managed credit responsibly, the better. This factor looks at:

• The age of your oldest account
• The average age of all accounts

Closing old accounts can shorten your credit history, so it’s often better to keep long-standing accounts open when possible.

4. Credit Mix (10%)

The type of credit you have can also affect your credit score, accounting for 10% of your score. Having a good credit mix can help with your score. If you have all high-value, high-intertest-rate debt, you cannot pay it off. Your credit score can go down.

Having a diverse mix of credit accounts that you pay off every month can show the credit bureaus that you have an expensive portfolio you can handle. A good credit mix would be student loans, a mortgage, and manageable credit card debt.

The following are some common debts you can have for a healthy credit mix

• Student loan debt
• Mortgage or home loans
• Auto loans
• Credit card debt

5. New Credit (10%)

Another 10% of the FICO score considers any new type of credit you’ve applied for. Most of the time, your credit score will go down when you apply for new forms of credit. That’s called credit inquiries. When you’re comparison shopping for student loans or mortgages, the scoring counts it all as one inquiry, even though you are weighing options for multiple lenders.

However, adding new credit can help to increase your score over time. As we mentioned above, having a healthy credit mix can improve your credit score. While taking on new debt can lower your score in the short term, paying off your debt on time can actually have a positive effect.

Can You Get Title Loans or Payday Loans With Bad Credit?

Yes. Improving your credit score takes time, but financial emergencies don’t wait.

Title loans and payday loans offer fast cash solutions for borrowers with less-than-perfect credit:

• Title loans are secured by your lien-free vehicle and based on its value
• Payday loans are short-term loans based on income, not credit history

Tennessee Title Loans, Inc. does not report loans to credit bureaus, so borrowing will not lower your credit score further.

For more insight into emergency borrowing, visit how cash advance loans work to understand when short-term loans make sense.

Quick Comparison: Title Loans vs Payday Loans

• Title Loans:
  Borrow up to $2,500 using a paid-off vehicle. You keep driving your car while repaying the loan.
• Payday Loans:
  Borrow up to $400 from a future paycheck. Approval is based on income, not credit score.

Both options are commonly used as bad credit loans when traditional financing isn’t available.

Frequently Asked Questions

What is a FICO 10 score?

This is the newest name for FICO scores. It takes into account your payment history, accounts owed, credit mix, new debts, and age of credit history to determine your score. It also considers heavily how you’ve managed your credit accounts over the last 24 months.

Will getting a title loan or payday loan affect my credit score?

Bad credit loans like title and payday loans will not reduce your credit score. We do not report our loans, so borrowing money will not lower your score. However, paying off the debt also will not increase your score.

Can paying off all of my debt increase my credit score?

Yes and no. While clearing debt can increase your score in the short term, having a good credit mix is also essential to calculating your score. We suggest making your monthly payments on time and keeping a healthy mix of credit accounts. We also advise you to worry about paying off high-interest-rate debt first.

Contact Us For Bad Credit Loans In Tennessee – Borrow Money Online Today

While you work to improve your credit score, Tennessee Title Loans, Inc. can help with our bad credit loans. Get same-day approval for title loans and payday loans to resolve financial emergencies as soon as possible. Receive quick financial help to avoid missing payments and hurt your credit score. Contact us for assistance by filling out our online form or calling us at one of our Tennessee store locations.

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.