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How Do Credit Scores Work?


If you are looking for a quick loan or payday loans online or offline, it is important to understand what your credit score is, how it works and how it may affect your ability to take out a payday loan. It is important to note that with Kallyss you are able to apply for a payday loan regardless of your credit score, good or bad and that applying on Kallyss will not negatively affect your credit rating whatsoever.

Your credit score is a vital part of your ‘financial DNA’ and, whether bad or good, your credit score will affect your ability to take out loans, what interest you will be able to get on those loans and what type of loans you will be able to take out. If you are looking to borrow money online, get a mortgage or any form of loan or credit, your credit score will in one way or another, affect you.

A credit score is a number that lenders use to determine whether or not you are suitable for a loan; it is built on your credit history and your past history of paying off debts and loans.

What is a Credit Score?

A credit score is made up of a number of different factors in your financial history; these make up a number that can be used by payday lenders to see if you are both eligible and suitable for the type of loan that you are applying for.

There are two different types of credit scores: generic credit scores and custom credit scores and this will be explained below. Things that will affect your credit score include:

  • Your total debt
  • Types of accounts that you have
  • Number of late payments from previous loans
  • Age of accounts

Your whole financial history will be available to the lender so that they can create this score and make a judgement on your suitability for your loan.

How do Credit Scores work?

Whether you are applying for a cash advance, installment loan, bad credit loan or anything else, lenders will use credit scores because they are consistent across the board and objective. This means they understand the financial history of everyone that they are lending money. This score also reflect the likelihood that you will be able to repay the debt on time because of past credit history.

Of course it is not a guarantee that a low credit score means you will not repay and a good credit score does not mean you will pay exactly on time but lenders can get a rough understanding of your payment patterns through a credit score.

A generic credit score is one that is used to determine risk of non repayment. This score is the same across all lenders and businesses and you can find this online for yourself with a credit check.

A custom credit score is created by the lender taking your financial history into account; these are unique to this specific lender such as a credit union and are used in case of mortgage or auto lending because they might need to have more information than a usual credit check to determine your score and risk. Always remember that if you borrow money from family and friends for example, your credit score will not be affected, as they are not lenders that will run credit searches on your file.

Why is a Credit Score Important?

When you’re submitting a form for a payday loan, mortgage, credit card or a mobile phone contract, your credit score is one of the most important things providers will take into account.

A credit score is based on a numerical value, where the higher your score, the better your credit rating is – and this number is made up of multiple factors. Having a higher credit score will make you more likely to be approved for loans, credit cards etc…

Therefore a credit score is important because lenders can refuse you a loan if your credit score is bad enough that they think you will not make repayments. Lenders can often also increase the APR or interest of a loan because you have a bad credit score; they believe that you are more likely to repay your loan when you realize the repercussions of not paying on time are worse.

Sometimes lenders can offer you different types of loans due to bad credit score such as guarantor loans or secured loans that mean their money is secured against your property or another persons property so that they know that they will be repaid regardless of your financial situation.

How Can I Improve My Credit Score?

To improve your credit score, you need to show that you can make payments for things on time, such as your cell phone, credit cards and other loans. Here are some of the top tips to improve your credit score to open you up to more options for loans from lenders:

  • Join the electoral register – This is simple and if you have not already done so it is a great way to improve your credit score quickly and easily. It helps lenders because if for example you need a payday loan in Texas, they will be able to see that you are indeed registered in the state you are applying for a loan in
  • Close down any unused credit cards – Unused credit cards can show unnecessary spending and financial irresponsibility so shut them down
  • Avoid applying for too many loans in too short a space of time – Applying for too many loans at once makes you look irresponsible and looks like you are applying for loans in order to pay off old loans
  • Consider your utilization rate – Lenders are looking for a utilization rate of around 30%, so be careful not to spend too much on your cards

Remember that Kallyss does not discriminate based on your credit score, you can apply for a payday loan with Kallyss regardless of how good or bad your credit score is. An application will not affect your rating and Kallyss can put you in contact with the best lenders in your state for you.