A personal credit rating informs a lender how reliable the potential client is to get a payday loan. If a person cannot get a personal loan, then most likely it is related to a “bad” credit rating. The problem is that it is somewhat difficult to understand a bad credit rating or a good one without contacting a bank. But it is necessary to be able to correctly assess the chances of getting a payday loan, considering you are even looking for a 500 dollar loan?
Why Do We Need a Credit Score?
Every borrower who has taken out a payday loan at least once has a credit history (CI) which is stored in a special credit bureau (CRB). It can be formed even if the person has never taken out a loan. For example, if you bought a product in installments in a store, have a salary card with an overdraft, acted as a guarantor of someone else’s loan, or even is a malicious defaulter of utility services.
The credit history records information about all attracted loans, including payday loans and debts. Bad credit history can have negative consequences for the payer who wants to take out a payday loan from a banking organization. The main thing is how they are maintained and extinguished. From these records, banks judge the degree of a person’s conscientiousness, whether a person regularly repays loans, and what can be expected of a borrower in the future. If payments were made on time, there were no delays, there is no excessive debt load, the borrower can be approved for a new payday loan on favorable terms.
How to Assess Your Credit Score?
It is almost impossible for a simple borrower to understand what are the chances of credit history. How can we get a new payday loan if there is already a bad credit history? There is too much data, especially when some of the borrowers cannot be categorized as unconditionally positive. If there are delays in a payday loan for several days, it is difficult to assess how it will look in the eyes of a potential lender; whether a credit history can be considered quite good or not entirely, or completely substandard when using a payday loan.
For the convenience of lenders and borrowers, the National Bureau of Credit Histories began to calculate the Personal Credit Rating (PCR). RCC is an integral measure of credit score made by taking into account all entries, weighted by risk level.
In simple terms, it is a reflection of the credit score, but it is simpler and more understandable since it is expressed in one number in the range from 300 to 850 units. Instead of evaluating two hundred parameters, now you can look at one indicator which is both clearer and faster.
What Credit Rating Is Considered Bad?
When calculating the PCR, it is taken into account how many loans a person took, how actively one used a payday loan; how many years of one’s credit history, whether one did not allow delinquencies in servicing loans, whether one was heavily credited, whether there are any material claims against a borrower from other lenders. All positive records bring additional points while bad credit, on the contrary, takes away. Accordingly, the more points and the higher the value, the more chances the borrower has to get a payday loan on favorable terms.
Although the numerical value simplifies the task of assessing the quality of credit history, it cannot completely solve it. There is not and cannot exist a clear border that would separate the meaning of a bad RCC with which a loan will not be issued accurately from a good one.
Low to High
When the credit history in the terms of receiving a payday loan is beginning to form and the borrower takes the first loan, then RCC is at a neutral level. It is neither good nor bad credit. Until a borrower started making the first payments to pay off the payday loan, credit scores were often not even calculated due to lack of information.
This does not mean that the borrower will not be approved for a loan anywhere. Banks issue loans to borrowers, including a payday loan without experience, but at the same time, they try to limit themselves to small amounts in a short period. The interest rate, in this case, is also set above the minimum.
If the borrower of the payday loan serves the first issued loans well and pays on time, the quality of a credit score begins to grow. But when your obligations are serviced inaccurately and payments are delayed, bad credit becomes apparent. After all, non-fulfillment of current obligations is the main reason for low GPC.
Different Banks & Different Ratings
Banks can have completely different credit policies and different benchmarks for potential clients. They are quite different from some commercial microfinance organizations. Even in one bank, the borrower of a payday loan can receive this type of loan but face a refusal in car loans, for example. Moreover, even the highest rating does not guarantee payday loans. At the same time, those with a low rating can receive it. The RPC assesses only the chances of getting a payday loan that is higher than the nominal value.