Money isn’t just paper anymore. It comes in the form of plastic, numbers, binary digits in a computer, cryptocurrency, and the all-powerful, well-known loans. Loans are somewhat of a building block of modern-day finances, and many homes, businesses, educations, and empires are built on what was originally a loan because the borrower didn’t have the money.
Some may think of loans in a negative light, and this can be true if you become overwhelmed by or mishandle them. They can also be used to your advantage though, and you do so by playing this borrowing game very carefully with shrewdness in your decision making.
The one thing about loans is they never really go away. Yes, even if you’ve paid it off and you think it’s dead and gone, it really isn’t. A loan and your repayment of it will be on your credit history for a long time—this matters when it comes to securing your next one.
This isn’t just about your mortgage though, or your car payment, or your student loans. No, loans mean everything you’ve borrowed, and this include short term loans too. Whether it be a cash advance, pay-day loan, express loan, or just a $10 purchase on a revolving credit line like a credit card, your repayment of it will be factored into calculating your credit worthiness.
Your Credit History
In these times, your credit history is one of the most important parts of your financial life. Borrowing money is essentially unavoidable for most people, and it’s a necessary part of achieving most goals. This can be troublesome for some. and rightfully so—no one likes to be in debt.
There are numerous ways to add onto your credit history, whether it be through a 30-year traditional mortgage, making routine purchases on a credit card, or just getting some short term loans from iCASH, the fact of the matter is that they will all contribute to your credit history.
How Short Term Loans Effect Your Credit
Different loans may carry different weights, depending upon the value of them and your terms of repayment. A lot of this calculation is done based on if you paid it off on time, what your average outstanding balance is, and how much of your total available credit is it using.
A topic of discussion that often comes up is about short term loans, and whether or not these seemingly measly loans have an impact on your credit rating, to which the answer is a resounding yes.
They can affect your credit rating—this is because your score is a mathematical representation of how responsible you are as a borrower. It’s been proven that many short term loans, like payday loans and other similar products, will affect your credit score.
Make Sure the Loan Has a Positive Impact on Your Credit
If you are looking for short term loans, then there are a few things you can do to reduce the impact they have on your credit. Of course, your credit will always be affected by how responsible you are in other areas of your life.
First of all, when applying for short term loans you should shop around before making any final decisions. There are many different lenders who offer these types of loans, and most offer competitive rates and terms. Make sure you look over all of them carefully, and make sure that you choose the lender that offers the best loan terms and interest rate.
Secondly, do not make more than one payment per month to make sure that your application will not be denied under the laws concerning short term loans. You should be paying off your loan on the last day of every month. If you are paying it off in the middle of the month, you may find that you will not be able to make your monthly payments, and you will be penalized.
If you are looking for a debt consolidation loan, make sure you look over all of your options first. Do not sign any documents without first speaking to your debt consolidation agency. This is a legal document, so if you sign it without talking to the professionals, they could end up getting your debt back before the consolidation company does.
It is also a good idea to go through your credit report to find any inaccurate information. This can make a big difference in your credit rating. Look for errors such as missing account balances, late payments or any other sort of negative information that might hurt your credit score.
Fixing Bad Credit from Short Term Loans
If this is you and you do find yourself with late payments and negative data on your credit report from previous short term loans you’ve taken, this too can be resolved over time.
It’s worth noting that in most cases, especially on bigger loans like a mortgage or car loan, the lending process can become very personal, and you may have the opportunity to explain these numbers instead of just being turned down due to your history.
This is not to say that you can fumble all your loans and be fine, but if you’ve perhaps righted the financial ship since then and are able to prove this to your lender of choice, they’ll likely be able to work with you. Although your interest rates may not be the most competitive, there’s still a good chance you can qualify if you prove yourself.
Outside of this, when qualifying for loans that are generally using automated systems to determine if you’re worthy or not, you may have a hard time getting approved with a bad credit history—this can be cleaned up though.
Taking Steps Toward Good Credit
The first step to repairing bad credit is to determine if there is something that has been overlooked in the past. If there is something, work on it. Once you have done that, then it is time to learn how to fix bad credit.
When you get the chance, you should go over your credit report for errors and make sure that they are removed. Also, do not use your credit cards unless you absolutely must.
The second step to fixing your credit is debt consolidation. If your credit is not very good, you should apply for a secured loan—secured loans allow you to lower your monthly payments through monthly installments. You should also consider using a home equity loan to consolidate your debt.
If your bad credit is already severe, you should work on rebuilding your credit as best as you can. This can include working with a credit counselor to get your finances in order and to learn how to make better financial decisions. Make a list of things you credit report that needs repairing and learn how to repair those items.
Finally, the last step to fixing your bad credit is to start shopping around for credit card offers. This can include applying for a credit card with a lower interest rate or with a rewards program.
Credit counselors can help you with all of these steps. If you want to take a deeper look at your credit, you may want to seek help from a credit repair company.
Why You Need Credit History
Credit is not an evil, and it’s not a yoke of burden if you use it instead of letting it use you. The disdain for it can be understood though, because everyone wants to be financially free and not indebted to a lender. However, it’s important to understand how to use the credit system to your advantage.
Even if you’re someone who wants to avoid loans entirely, it will likely be to your benefit to secure some sort of financing and make payments on it periodically, even if you could pay for it in cash. This will help build your credit history for a time in the future when you may find yourself actually needing a loan, and will ensure you’re able to qualify.
What happens if you don’t have any credit history? You will likely not ever qualify for a credit card if you were to need one, any car loans or mortgages will have to be done via manual underwriting, which is often much harder to find and can end up handing you a higher interest rate, and you’ll be in a tough situation if something comes up where you do need to borrow money from a private lender rather quickly.
You don’t have to become a victim of bad credit or no credit, you can do your best to mitigate their impact on your life and your financials as a whole by handling them responsibly and with caution.
Don’t Let Short Term Loans Drag Your Credit Down
If you decide short term lending is the source for you, make sure to use it to you and your credit report’s advantage. Take that loan and make the payments on it promptly and in full. Short term loans are a great way to quickly build some credit history in the form of an installment form of repayment, which looks good on your credit report.
This will end up boosting your credit score even higher and ensuring your financial future, assuming you continue these good habits.