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How Your Credit Score Can Affect Your Loans

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How Your Credit Score Can Affect Your Loans

If you have a poor credit score, you may sometimes feel like there's no way to get cash in an emergency. Banks are not well-known for being quick and flexible when it comes to borrowing money, and you don't want to get stuck with an unlicensed payday lender who claims they don't require a credit check to give out a loan.

There are many reliable and qualified short term lenders out there who can provide small loans to Canadians with bad credit files. It's important to be well prepared when taking out any type of loan with a money lender, and to have a full understanding of how it could affect your credit score.

Taking out a short term payday loan will generally have no impact on your credit score unless you default on the payments. Nevertheless, let’s go back to the basics and learn the ways in which your credit score plays a part in the borrowing process.

What Is a Loan?

In short, when you get a loan, you get money from a company with the understanding that you’ll be paying it back plus a bit more in interest.

When you obtain a loan, it’s a matter of trust and planning. The business must trust you and your ability to pay them back the principle, plus the interest. On the other side, you must plan and budget well enough to use the loan and pay it back at the right time. It doesn’t matter if it’s an emergency loan or mortgage; all loans work the same at the end of the day.

Maybe you want to consider a bad credit loan with a responsible lender. These types of companies offer loans specifically for Canadians who have had struggles in their lives which have prevented them from borrowing money from traditional lenders.

Private lending companies have recently helped to fill the gap in the market by offering loans to people with bad credit. These companies offer bad credit loans with instant approval to most Canadian residents, because their metrics are based on individual circumstances rather than relying only on their credit score. The net result is that more Canadians can qualify for a short-term loan.
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For Traditional Lenders, Credit Scores Are a Measure of Trust

Banks are extremely risk-averse, and consequently try to maintain fairly high credit score standards for their borrowers. In recent years, these standards have only gotten more strict. Banks don’t know you and will not work to understand unique financial circumstances. They use credit scores to label their customers in a way that makes them easy to categorize according to risk.

If you have a bad credit score, traditional lenders can often require a higher interest rate when you take out a loan with their institution. They believe that customers with a poor credit history present a higher risk, and therefore the bank needs to make more money off of them to ensure the loan is worth the risk.

If you have a high credit score, then there’s a high chance that you will be able to get a good loan. However, if you have a bad credit score, you might only be able to get smaller loans with high-interest rates, or no loan at all. This makes it exceedingly difficult for many Canadians to get the funds they need at reasonable rates.

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You're More Than Just A Number

At iCASH, we offer short term loans even to those who have poor credit scores. While we do perform a credit check as part of the approval process, your score is NOT a disqualifying factor. We consider numerous factors before making an approval decision, like your credit history and amount requested to provide quick approval. We’re mostly concerned with your income and whether or not you have the financial means to repay your loan.

We understand that life happens, and we can't always stay on top of our finances when emergencies occur. This doesn't mean you're irresponsible, or unable to repay a loan on time. That's why it's important to look for a lender who examines other factors in your life besides your credit score.

Getting a Loan With a Poor Credit Score

iCASH performs a credit check before a lending decision is made in order to verify each customer's identity. However, this is the only time we make an interaction with your credit file.

A report to a credit bureau would only be made by collections if the loan has been in delinquency status for over 180 days. For customers who repay their loan by the agreed upon terms, then there is usually no positive or negative impact on their credit score.

At iCASH, we offer short term online loans to thousands of responsible Canadians each year. All of our interest rates are fixed. Once you're approved for a certain amount, that’s what you pay regardless of your personal credit history, income, or other factors. Our current rates can always be found on our website, expressed as a dollar amount per $100 borrowed. If you find that traditional lenders keep turning you away based on factors you cannot control, try taking out a short term loan with iCASH.

Ramona Glanville

Ramona has been a regular contributor to some of Canada's top wealth-management editorials for over 30 years. She strongly believes in good saving habits, reducing financial clutter, and red wine.