There is always a scope that you are in a financial crunch, and you need to source it immediately with a personal loan. With a wide range of mortgages available, each facilitates meeting certain kinds of requirements. When it comes to a 300 dollar loan, such an amount is generally covered under personal loans.
A 300 dollar loan is a small loan that does not have much impact on credit score. Even if you have a low credit score, you are still eligible to get this loan. But, to meet the greater financial contingencies, your credit score matters.
A credit Score is one of the best ways to understand the credit history of any borrower and to know his credibility. To qualify for most of the loans, a credit score is a prerequisite. People with a higher credit score are often eligible for loans quickly, while people with a bad credit score often face rejection.
If you are also in need of a loan and want to know the relevance of credit score, here we go:
What is a credit report?
A credit report is a report that has detailed information about all your open loans, all the loans which you have borrowed so far (paid or unpaid), and your payment history. This detailed report reflects your creditworthiness and indicates if you are in the position to repay the loan which you are seeking.
Hence, the credit report contains the following information broadly:
List of debts: All types of loans, including the student loan, personal loan, credit card, home loan, automobile loan, or any other loan, are covered in this list. It also briefs about your history of repayments (whether timely or delayed) and any default (if committed).
Inquiries: All the inquiries which are made about your creditworthiness and if any lender has given you a loan based on such investigations.
Pending bills: All the bills which are outstanding for the utility or medical are included. Even if you paid such bills late, they would get recorded as late payments.
Public-record information: Any bankruptcies or tax liens linked to you are also part of your credit report
So, we can conclude that a credit report is a 360-degree view of all your credit sources and repayments.
What is a credit score?
A credit score helps a lender to determine your loan repaying ability. There is a score range of 300 to 850, which is considered to extend any loan by a lender as follows:
It reflects your ability to repay the loan efficiently. Any delay in the repayments has a negative impact on your credit score and brings it down.
Length of credit used:
Keeping your credit low by managing the various loans wisely is an excellent way to maintain a good credit score. Pay your bills on time and all other dues on or before their outstanding dates to have a positive impact on your credit score.
Type of credit:
It includes the various sources from which you procured a credit – credit cards, finance companies, mortgages, installment loans, retail accounts, etc
The total amount of debt:
If all your credit lines are up to their limits, it brings your credit core down. To maintain a good credit score, keep the credit balance at the lowest possible.
Are you seeking new credits? If you applied for several credit cards at the same time, it reflects in your credit history and brings down your credit score.
A higher credit score is a sign of enhanced creditability, and you have more options to get the required loan at the negotiable rate of interest.
The average credit score points are 725. Anyone who has a credit score more than this gets the best loan deals at manageable interest rates. A person having a credit score of less than 725 can still manage a loan but with limited options and a higher interest rate.
A person, with a score of less than 650, needs to work on his credit score to improve it. However, he is still eligible to get a 300 dollar loan.
How to improve your credit score?
There are lots of ways in which you can improve your credit score as follows:
Review your credit report: It is crucial to ascertain the areas in which you are lagging, and you need to work. By reviewing your report carefully, you may find some errors which are pulling down your credit score drastically and quick-fix it by reporting to the concerned credit agency. Once you notify about the outdated or wrong information in your credit report, it helps in improving your credit score significantly.
Pay more frequently in your billing cycles: Pay off your bills and credits after every two weeks if you can afford it. It will bring down your credit utilization, and gradually your credit score will rise.
Contact your creditors:
Plan out a payment schedule to pay off your liabilities to reduce the negative effect of missed payments due to high outstanding balances and defaults.
Avoid closing unused credit cards:
By not closing the unused credit card, you will have a more extended credit history to position your credit score in a better way. Hence, even if you are not using individual old credit cards, do not close. Prefer to close the newer credit accounts, if required.
Pay off ‘maxed out’ cards:
If you are using multiple credit cards and have outstanding from them on different dates, you should pay off the credit card, which has the nearest due date. It helps in reducing the credit utilization rate.
Be careful with old debts:
When a mortgage is ‘charged off,’ no further payment is required to make in this account as the debt I already settle. However, if you make any payment to this account, even mistakenly reactivates your paid account and brings down your credit score. Hence, it would help if you were very careful while making the repayments.
Diversify your accounts:
Use a credit mix of mortgage, credit cards, personal loans, and auto loans instead of relying on one source of credit. As long as you make timely payments, adding different elements of credit improves your credit score.
These small tips can improve your credit score drastically and get you good loan options.