Understanding Title Loans & The 5 Key Factors of a Credit Score

Your credit score is one of the most crucial indicators of your financial health, as it can explain how often you make payments and whether you are trustworthy enough for a loan. Understanding credit scores and how they are calculated can help you as you try to improve your credit score.

This guide from Tennessee Title Loans, Inc. will explain credit score factors and how to improve your credit score. We will also go over how to get emergency loans when you have bad credit, such as title loans and payday loans.

What Is a Credit Score & How Does It Work?

FICO (Fair Isaac Consideration) credit scores range from 300 to 850 and show lenders how likely you are to pay back a loan. Anything under 650 is not seen favorably, whereas 750 and up is considered excellent.

Your credit score often dictates your financial future. It can impact the type of mortgage you qualify for — or if you can get a mortgage at all. It’s a factor in qualifying for credit cards and can dictate your interest rate.

Your FICO score is used by an estimated 90% of America’s top lenders, including the top three credit bureaus in the United States: Transunion, Equifax, and Experian. Keeping your credit score high can help you get qualified for bank loans and credit cards, which can help when faced with a financial emergency.

5 Credit Score Factors Explained

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

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

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

Your credit history, or how long you’ve had credit in your name, accounts for 15% of your credit score. This includes how long you’ve had credit accounts open and the average age of these accounts. When you have a long history of credit, your score will increase.

However, that is only if you’ve kept your credit healthy. If you have credit accounts open for a while because you fail to make payments, your score can go down.

Taking on debt you can pay could increase your score. If you have a long history of paying off debt, such as your mortgage or student loans, your score can grow because of your healthy practices. Don’t take on debt unnecessarily, but also don’t worry about the credit impact of getting a mortgage.

4. Credit Mix

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

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 a Title Loan With Bad Credit?

Now that you have a greater understanding of credit scores, you can begin making changes to improve your credit score. However, that can take a while, and you may need emergency cash now for a financial emergency.

Cash loans like title loans and payday loans can help you when improving your credit score, as you can get approved with bad credit. At Tennessee Title Loans, Inc., we do not report our loans to credit bureaus, so you can borrow money without lowering your score.

Learn more about title loans and payday loans below:

• Title loans: a secured loan that lets you borrow up to $2,500 if you have fully paid off your car. Your loan amount will depend on your vehicle’s value. The required items are a driver’s license, a lien-free car title in your name, and your vehicle for a quick inspection.
• Payday loans: These unsecured loans let you borrow up to $400 from a future paycheck. You can borrow money based on your income level and repay the loan amount with your next paycheck. You need a state-issued ID, your most recent pay stub, and a blank check from an active checking account in your name to get approved.

FAQs

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.