Payday Loans and Bad Credit

Bad credit can follow you for a long time after you initially run into a problem. Medical emergencies and unemployment can leave anyone in financial hardship. Lenders may judge you based on years-old events without considering your current financial situation. The first step in rebuilding your financial health is understanding exactly what bad credit means.

What is considered bad credit?

Some lenders may use credit score along with other factors for loan consideration. An example is the FICO scoring system — which ranges from 300 to 850 — to gauge the likelihood of a borrower repaying a loan. Scores below 620 often fall into the “bad credit” range, which makes it difficult for those people to borrow from lenders that only use FICO to determine loan eligibility. Many factors play a part in the scoring process.

Missed Payments

According to myFICO.com, FICO considers three elements with missed payments: how late payments are, how long you've gone without missing any payments and the total amount of missed payments in your history. The credit reporting bureaus track this negative mark with notations every 30 days. For example, if you took three months to get current on a past-due debt, the account would have a 90-day mark on it. Longer, more frequent delinquencies have a greater impact on your score than a one-off 30-day late.

Defaults and Collections

Sometimes you can't catch up on bills as they pile up. Many companies consider an account in default if you exceed several months without making arrangements or catching up on missed bills. Some businesses work with collection agencies to try to recover any owed money. When that happens, you might see a collection notation on your report. Collections may remain on your account after you pay them off, but if a lender manually looks at your report, they can see your steps toward financial responsibility.

Public Records

Bankruptcy can stay on your credit report for up to 10 years and has a significant impact on your score. Any tax liens and civil judgments may also be listed on your report. You may be able to remove some public records from your credit report once you satisfy the lien or judgment.

Foreclosure and Repossession

Foreclosure and repossession indicate a defaulted secured installment loan. Since the loan is backed by physical property, the lender takes that property back if payments fall behind. Foreclosure refers to home mortgages, while repossession covers other types of property (such as automobiles). In some regions, you may receive a deficiency judgment if the lender couldn't recover the loan amount after selling your property at an auction.

High Credit Card Utilization

Your credit card utilization is the ratio of your current balances and the card limit. If you have a lot of maxed-out cards, the FICO scoring system considers this a negative indicator. Thankfully, you’re in control of this factor. By reducing your credit card balances and keeping utilization low, your score may rise over time.

How do you apply for an online payday loan?

Applying for a payday loan using LendUp takes only a few minutes. The application is done online using a smartphone or computer and loan decisions are instant. If your loan is approved before 5 pm PT on a weekday, your funds will be deposited to your account within one business day. Although access to those funds are utlimately determined by your bank and how fast they process the funds. To apply you'll need:

• Your name

• An active email address

• Your current phone number

• A checking account that can accept electronic transfers

Disclaimer: LendUp is not providing financial, legal or tax advice. If you need or want such advice, please consult a qualified advisor. Also, LendUp is not a direct lender, but a loan-matching platform that connects borrowers with direct lenders.