Paying off a loan is part of being financially responsible. However, the business world doesn't rely on responsibility alone. When taking out a loan, it's important to have a thorough and complete understanding of how you are expected to repay it; this protects your own credit history and ensures there are no surprises.
However, why and how your credit score gets lowered sometimes is not well understood in advance. Today, we're going to talk about this very subject. Back to the basics to ensure that you will be ready if you ever need a mortgage, payday loan, or any other form of credit you may need.
How Your Credit is Affected by Late Payments
Let's start with what happens when you pay a loan a few days late. If it's a one-time occurrence, you might see a small dip in your score (maybe by a point or two); however, it will go away quickly with more on-time payments.
On the other hand, if you consistently pay a loan late, you could start to see a dive in your credit score. This is due to the loan company reporting on your reliability. In short, the loan company is letting other people know that you had trouble paying your bills on time.
The best way to ensure you don't suffer from this when you need to borrow money is always to pay your bill at least two to five days before it's due. In many cases, you can actually choose a due date that works for you. This can help if you are living paycheck to paycheck.
How Credit Scores Are Affected By No Payments
There are many reasons that people become unable to pay back a loan, from losing a job to gaining unexpected expenses. However, as bad as it may be, many traditional lenders like banks are very rigid in their policies. As businesses, they might sympathize, but contracts will come first. If you stop paying your loan, you can expect your credit score to plummet.
Sometimes, a company may offer multiple repayment options for their express loans; however, you should go to them first (before you miss payments) to show good faith and see what can be worked out.
If you don't, not only will you experience a falling credit score, you might also start to experience debt collections calls and repossessions. A falling credit score from no payments will be more severe and show other companies that you can't be trusted to repay your debts.
How Paying Loans Changes Credit Scores
Not everything needs to be gloom-and-doom. Rather, there are great things that can come of loan repayment. Should you pay your loan on time every month, you'll see your credit score grow!
The opposite of what we talked about above is happening. Credit lenders are looking at you and determining that you can be trusted to pay back your debts on time regularly. This, in turn, they let others know via your credit score.
Look For a Flexible Lender
Whether you need a simple payday loan or an ODSP Payday Loans, iCASH has what you need with an easy to use website and mobile app. iCASH offers multiple repayment methods as well as friendly customer service to help ensure you are able to repay your loan easily and stress-free. We offer a fast process and complete transparency, so you know what you're getting and at what cost right away.